taxpro99 wrote:Does a commercial plumbing contractor meet the definition of a trade or business that qualifies as a Real Estate Professional?
(C) Real property trade or business.---For purposes of this paragraph, the term “real property trade or business” means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.
(i) Real property.---(A) In general.---The term real property includes land, buildings, and other inherently permanent structures that are permanently affixed to land. Any interest in real property, including fee ownership, co-ownership, a leasehold, an option, or a similar interest is real property under this section. Tenant improvements to land, buildings, or other structures that are inherently permanent or otherwise classified as real property under this section are real property for purposes of section 469(c)(7)(C). However, property manufactured or produced for sale that is not real property in the hands of the manufacturer or producer, but that may be incorporated into real property through installation or any similar process or technique by any person after the manufacture or production of such property (for example, bricks, nails, paint, and windowpanes), is not treated as real property in the hands of any person (including any person involved in the manufacture, production, sale, incorporation or installation of such property) prior to the completed incorporation or installation of such property into the real property for purposes of section 469(c)(7)(C) and this section.
(C) Inherently permanent structure.---The term inherently permanent structure means any permanently affixed building or other permanently affixed structure. If the affixation is reasonably expected to last indefinitely, based on all the facts and circumstances, the affixation is considered permanent. However, an asset that serves an active function, such as an item of machinery or equipment (for example, HVAC system, elevator or escalator), is not a building or other inherently permanent structure, and therefore is not real property for purposes of section 469(c)(7)(C) and this section, even if such item of machinery or equipment is permanently affixed to or becomes incorporated within a building or other inherently permanent structure. Accordingly, a trade or business that involves the manufacture, installation, operation, maintenance, or repair of any asset that serves an active function will not be a real property trade or business, or a unit or component of another real property trade or business, for purposes of section 469(c)(7)(C) and this section.
(A) Real property development.---The term real property development means the maintenance and improvement of raw land to make the land suitable for subdivision, further development, or construction of residential or commercial buildings, or to establish, cultivate, maintain or improve timberlands (that is, land covered by timber-producing forest). Improvement of land may include any clearing (such as through the mechanical separation and removal of boulders, rocks, brush, brushwood, and underbrush from the land); excavation and gradation work; diversion or redirection of creeks, streams, rivers, or other sources or bodies of water; and the installation of roads (including highways, streets, roads, public sidewalks, and bridges), utility lines, sewer and drainage systems, and any other infrastructure that may be necessary for subdivision, further development, or construction of residential or commercial buildings, or for the establishment, cultivation, maintenance or improvement of timberlands.
MWEA wrote:In Sezonov v. Commissioner it states an HVAC contractor wouldn’t qualify.
Terry Oraha wrote:All buildings (and every part of the building) are an aggregation of tangible personal property fixed permanently so as to become something else. That something else is a real property. So i am guessing that we can say with confidence a person can qualify as a RE prof if (in their trade) they are someone who can affect the property as a whole (or sub component of a building). Like general contractor, developer, project manager, etc. These are people who can affect the "building" as a whole.
Let's say the entire plumbing systems is a component of building real estate. If the GC delegates the responsibility to build the whole plumbing system to a sub in the course of the building construction then that is development even if it is by a plumber or plumbing company. Because they are operating on the building as a whole. Not every plumber is licensed to build a building's plumbing system. I believe they need to have a general contractors license. This to me is where i believe the line is drawn in the absence of more clear guidance.
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