Sec 469 RE PRO Aggregation Question

Technical topics regarding tax preparation.
#1
CO CPA  
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I have a client that has the following real estate activities:

-SMLLC taxed as S corp - commercial real estate broker - - full time day job
-3 SF Rental properties owned personally
-3 SF Rental properties owned through 50% interest in pship

-Taxpayer qualifies as RE professional
-Planning to elect to aggregate activities per IRC 469(c)(7)(A) so that taxpayer can qualify for material participation across all properties to take the loss against other non-passive income. He wouldn't qualify for material participaton on a property by property basis.
-client has no suspended PALS

I'm wondering whether it is correct to mark the S corp pass through income as "RE professional" so it flows to Line 43 on Schedule E? Or would I only mark the rental properties as RE professional income and mark the S corp income as nonpassive? Schedule E, Line 43 states "enter the net income or loss you reported anywhere on Form 1040 from all RENTAL real estate activities". Based on this statement, I believe I should only mark the rental activities to flow to this line. I'm confused because his day job as a commercial RE broker is important to him qualifying as an RE professional...but maybe that's irrelevant for the 469(c)(7)(A) election...
 

#2
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Or would I only mark the rental properties as RE professional income and mark the S corp income as nonpassive?


Technically, yes.
but maybe that's irrelevant for the 469(c)(7)(A) election...


Well, it’s irrelevant for purposes of the Question on Line 43, because you’d only complete that line if you’re stipulating you are a RE Pro in the first place.

But I understand your concern. Let me ask you this: Let’s say there is $100k of income from Real Estate Brokerage and a $20k loss from rentals. Are we really violating Line 43 by inserting $80k? Perhaps not. For one thing, the Question doesn’t say “ONLY enter the net income from all rental real estate activities.” In other words, the wording of the Question doesn’t prohibit other amounts (non-rental amounts) from being inserted on that line. And second, if you put down $80k, you’ve technically reported the $20k rental loss (as part of that $80k number).
 


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