BPM's Real Estate Insights 2019 Volume 01 | Page 11

At midyear we introduced the new accounting system… in reality we're still insolvent. Reprinted with permission of the publisher. From Executive Smart Charts, copyright 1993 by Herbert Stansbury, Barrett- Koehler Publishers, Inc., San Francisco, CA. All rights reserved. bkconnection.com to be used by the taxpayer as a residence for personal purposes under the vacation home rules and real estate rented or leased under a triple net lease are not eligible for the safe harbor. A triple net lease for this purpose includes a lease agreement that requires the tenant or lessee to pay taxes, fees and insurance, and to be responsible for maintenance activities for a property in addition to rent and utilities. A taxpayer or an RPE must include a statement attached to the return on which it claims the IRC Section 199A deduction or passes through Section 199A information that the safe harbor requirements have been satisfied. The statement must be signed by the taxpayer or authorized representative who has personal knowledge of the facts and circumstances under penalties of perjury. A rental real estate enterprise that does not meet the safe harbor requirements may still be treated as a trade or business for 199A purposes based on facts and circumstances. The qualification of a rental activity or a rental real estate enterprise as a trade or business under this safe harbor is only applicable for purposes of Section 199A. Thus, for example, if the property owner is not otherwise obligated to issue Forms 1099 to contractors, such determination is unaffected by these new provisions. We encourage owners of rental real estate to contact their tax advisors to discuss this new safe harbor and engage in appropriate planning to maximize the potential benefits available under Section 199A. n Jackie Matsumura is a Partner and Real Estate Industry Group Co-leader at BPM. Contact Jackie at [email protected] or 925-296-1035. Bob McGrath is a Tax Director at BPM. Contact Bob at [email protected] or 650-855-6893 BPM Real Estate Insights 11