Schedule E reporting for large number of rentals

Is there any authority for only providing a summary Schedule E page 1 when the taxpayer has say 500 or more separate properties? I couldn't find any support for that. Not even for attached a pdf with the detail by property.

Len Raphael
Oakland CA

Not even for attached a pdf with the detail by property.

How about this from the instructions for Schedule E?

"Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties,
partnerships, S corporations, estates, trusts, and residual interests in REMICs.
You can attach your own schedule(s) to report income or loss from any of these
sources. Use the same format as on Schedule E." [emphasis added]

To me this means you can do what you propose by attaching a PDF of the details.

As long as you keep separate income/expense/depreciation records you could submit a Sch E summary and pdf spreadsheet. What would concern me is being able to properly take items in and out of service as they wear out and are replace or as individual property is sold.

Thank you. I missed that when I read the instructions.

What I didn't mention is that this particular taxpayer doesn't even internally track most expenses by property because "they have a crew on payroll that goes around property by property maintaing them. Crew visits a couple of dozen a day and are not set up with a way to track time or materials etc. for each of several hundred properties.

Len Raphael
Oakland CA

I'd have thought knowing the real results by property would be good for an owner/manager. But if not dealing with passive activities, would it matter in a tax sense that expenses are not tracked by property? Or, for that matter, even rental income. The tax-sensitive items would be acquisitions, improvements, depreciation, and dispositions. With due regard, of course, to the repair regs.

I am out of range, so go ahead and throw the darts regarding what I've missed. OK, here's one. State and local taxes, unless they are all in one taxing jurisdiction.

I don't think it matters that the 'crew' identifies their expenses by property in a detailed manner. A reasonable method to allocate these expenses among the properties should be fine.

One idea I've heard others propose is to create a separate entity for this 'crew'. However, you probably don't want to do that because you'd likely have to charge yourself sales tax on these services.

The IRS says that it wants that information on a property by property basis. But if the taxpayer groups all of the rentals as one activity, I don't think that there is any tax impact. A sale of one property won't trigger the release of any suspended PAL c/os. If the taxpayer does not track costs by property, I would attach a schedule and disclose what I information I have:

Address of each property
Total rent by property
List of expenses in total, not broken down by property
Net income/loss, which would tie to the reporting on the Sch E.

What is the IRS going to do? If an auditor wants to come investigate the allocation of staff payroll among the properties, then let him. There won't be any adjustment.

I would just make sure to disclose as much as possible so that you don't get into a situation where the IRS says that you have an incomplete return.

For the main owner who manages the properties full time, and who hopefully elected to aggregate all the rentals to pass the material participation test for each rental (to get out of the NIT), I agree there shouldn't be any harm to the "fisc" aka tax revenue, because overall there is net rental profit. All the properties are in CA, or that would be a problem with the other states not knowing how much to tax. CA doesn't believe in real estate pro status, but there wouldn't be any net passive losses to track because of overall rental profit.

Comes down to the "complete return" risk. Would be impossible for IRS computer to evaluate the audit potential if every taxpayer with rental property lumped all their expenses other than maybe interest and taxes. Theorectically, incomplete return = statute of ltds. doesn't start running? Practically, never seen or heard of IRS asserting incomplete return. Must be heck Schedule C's consisting of extremely summarized numbers.

Len Raphael
Oakland CA

For clients that have multiple properties I create a property on Schedule E called common expenses. Under this I show no income just expenses...miles..telephone ..repair bills that the client didn't separate by property. I haven't had a problem yet doing it this way.

We have clients with 20-30 rentals, and 3-5 LLC's. We keep track of them all on an individual basis, whith their own separate Schedule E's. Then again, out guy is a real estate pro that buys, improves, rents, and sometimes sells properties and businesses.