Realty411 Magazine Featuring Lori Greymont | Page 16

Tax Deductions, pg. 14
specific: You combine your
income on a joint tax return.
But you cannot combine your
hours to claim status as a real
estate professional on your
individual/couple income tax
return.
NOTE: The IRS trains its
agents to ask about who
actually manages the prop-
erty. They are also trained to reality-check what you tell
them against your Schedule E. If you are claiming you are
actively involved in every aspect of your property – but
simultaneously claim a lot of management fees on your tax
return via Schedule E, and deduct them from rental income,
that gives the IRS ammunition to shoot down your deduc-
tions.
RED FLAGS
Here are some Red Flags IRS auditors look for:
• Do you have an operating agreement for your LLC? In
an audit, the auditor WILL ask to see them.
• Did you document a shareholders’ meeting this year for
your corporation? Are there minutes prepared?
• Did you group all your real estate investments together
as a single activity?
Be prepared to produce other
years’ returns showing the same
election. The IRS expects con-
sistency. The election is binding
on future years.
• If you are a limited partner in
a partnership, you can’t claim
the $25,000 special allowance.
The same applies if you have
less than 10 percent interest in
image: 123rf.com
ownership.
• If you try to deduct real estate
losses over $25,000 and you’re not a real estate profession-
al, expect the IRS to scrutinize you.
• Did you deduct rental losses while showing an AGI of
greater than $150,000?
BECOME AUDIT PROOF
Here is one final suggestion: Never go into an IRS audit by
yourself. IRS agents are trained to ask trick questions and
to trap you into saying things.
For a FREE BOOK on how to capture all the tax deduc-
tions you are entitled to and stay audit proof, go to
http://UnitedStatesTaxRelief.com for a FREE download.
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