The 199A rules for the 20% deduction on rental real estate activities was ambiguous, but Notice 2019-07 now provides some ray of light in the form of a key safe harbor rule.
How it works: A rental activity (including multiple rental activities combined into a single enterprise) is treated as trade or business if the taxpayer spends 250 hours of more on rental services. To qualify for this 250-hour safe-harbor, the taxpayer must also meet the following requirements.
- The taxpayer maintains separate books and records for each rental activity (or the combined enterprise); and
- The taxpayer maintains contemporaneous records, including time reports and similar documents, concerning hours of services performed, a description of all services performed, the dates on which services are performed [Read More]