010. Real Estate Professional Status for GPs of Syndicates and Funds

Nathan Sosa, a CPA and Tax Pro at Hall CPA, joins Brandon and Dylan to discuss the concept of real estate professional status and how it applies to real estate operators at different points of scale. We discuss the requirements and implications of real estate professional status, including the limitations on passive losses and the need for material participation. The conversation also delves into the challenges of qualifying for real estate professional status at scale, such as when raising capital or managing large portfolios. It highlights the importance of understanding the specific activities and ownership structure that determine eligibility for real estate professional status. We also explore the impact of ownership tests and the concept of employee ownership and its relevance to the real property trade or business. Takeaways

• Real estate professional status allows individuals to offset passive losses with non-passive income, but it requires meeting specific requirements and material participation in real property trade or business.
• Qualifying for real estate professional status can be challenging at scale, especially for fund managers and large-scale operators who may be more removed from day-to-day operations.
• The determination of real property trade or business and the ownership structure play a crucial role in qualifying for real estate professional status.
• Seeking professional advice is essential to navigate the complexities of real estate professional status and optimize tax savings. Ownership tests and layering can impact eligibility for real estate professional status.
• Employee ownership may not be applicable to the real property trader business.
• Scale is a unique consideration when determining real estate professional status.
• Keeping detailed records is crucial to support claims of real estate professional status.