California Real Estate Agent is a Qualifying Real Estate Professional

The IRS argued that a rental property owner who held a California real estate agent’s license, but not a California real estate broker’s license, was not engaged in the real estate brokerage trade or business. The IRS said that the agent was not a qualifying real estate professional entitled to the exception from the passive activity loss rules that generally apply to rental real estate losses, and disallowed the loss deductions on the agent’s tax returns. This is completely contrary to the way that this issue has been handled for many years by taxpayer, CPA’s, and the IRS. In the Tax Court case Agarwal, TC Summary Opinion 2009-29, the Tax Court summarily slapped down the IRS for this nonsense and determined that the taxpayer didn't even have to be licensed as a real estate agent, let alone a broker, to be treated as engaged in the real estate brokerage trade or business and eligible for the qualifying real estate professional exception to the passive activity loss rules on rental real estate.

Late Election to Treat All Rental Properties as Single Activity for Material Participation / Loss Deductions

Married taxpayers who acted reasonably in good faith allowed by IRS in Private Letter Ruling to make a late election to treat all their interests in rental real estate as single rental real estate activity, allowing them to meet active participation requirement to deduct losses. – San Diego CPA Michael Fitzsimmons