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Tax Smart Real Estate Investors Podcast
294. IRS Red Flags: Why Foradis Failed to Prove REPS with Nathan Sosa, CPA
Oct 8, 2024
Nathan Sosa, a Senior Tax Advisor at Hall CPA, shares his expertise on real estate tax strategies and IRS scrutiny. He delves into a recent court case highlighting the complexities of obtaining real estate professional status, especially when balancing a W-2 job. Key takeaways include the importance of documentation and education to avoid costly mistakes during audits. Sosa also discusses strategies for short-term rental investments and the critical need for professional guidance in navigating evolving tax laws.
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Quick takeaways
- Real estate professional status requires meticulous documentation to prove hours worked on real estate activities, especially for taxpayers with full-time jobs.
- Short-term rental investments provide a strategic tax advantage for full-time employees, allowing access to non-passive losses by maintaining specific rental terms.
Deep dives
Understanding Real Estate Professional Status
Real estate professional status can be a beneficial designation for investors aiming to utilize tax advantages, but its application comes with specific requirements. A recent court case highlights that having a full-time W-2 job disqualifies taxpayers from claiming this status if they cannot prove they spent the requisite hours working on real estate activities. The case demonstrated that the taxpayer, despite spending significant time on rental property improvements, was unable to substantiate the necessary hours to qualify due to his full-time employment. Therefore, taxpayers looking to achieve this status must exercise caution and ensure they can meet the stringent documentation demands set forth by the IRS.
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