Tax Treatment of Real Estate Dealers, Investors, and Professionals

Description

Classification of taxpayers working in the real estate business continues to be one of the most hotly litigated areas of taxation. Taxpayers want dealer status when sales result in losses to benefit from ordinary deductions and investor status when sales result in gains to benefit from capital gains treatment.

Unfortunately, determining into which category a real estate sale falls is a facts and circumstances determination based primarily on case law. Property held primarily for sale in the ordinary course of business may lead to a dealer classification producing ordinary income, while the same piece of property, if held to benefit from its appreciation over time, could be considered an investment.

These considerations, along with new real estate quandaries presented by recent tax reform leave advisers to real estate investors, dealers, and professionals struggling. Taxpayers may now want to be a trade or business to benefit from the generous 20% deduction under 199A.

At the same time, taxpayers may not want to be in the active trade of developing real estate if they want to benefit from the tax savings provided by opportunity zones. Determining and reconciling the benefits and drawbacks of each real estate classification is critical for tax professionals advising taxpayers selling real estate.

Listen as our panel of experts details the criteria for determining each real estate classification, how to advise clients to obtain the most beneficial designation, and how to benefit from tax-savings opportunities as investors, dealers, and professionals working with real estate after tax reform.