On Friday, January 18, 2019, the Treasury Department issued final rules under IRC Section 199A. As part of this regulation package, Treasury also provided much-needed relief and clarity for rental real estate activities.
IRS Section 199A is a tax incentive for pass-through entities and sole proprietorships. It effectively reduces the federal tax rate on income arising from certain activities by as much as 20%. However, Section 199A only applies to an activity that is a “trade or business.” This is a term that is not clearly defined by the IRS (shocking, I know) and there is also vague guidance in case law. In general, the case law would suggest that many real estate activities might not qualify under this definition. Real estate owners, developers and investors thus faced uncertainty as to whether the incentives under 199A would apply to them.
The Safe Harbor [Read More]