We’ve been posting about the increasing number of IRS audits against Real Estate Professionals and the hard stand they have been taking. Some of the horror stories we’ve heard:
(1) Real Estate Agents denied the REP status because they are not brokers
(2) Hours spent looking at property not allowed because this is considered an “investment”
(3) CPA charged with preparer penalty because he relied on client’s information for REP status
and the list continues.
So, this is what we know. The IRS is targetting Real Estate Professionals. The timing couldn’t be worse. At a time of dropping home values, tightened credit and a general malaise in the housing market, an aggressive IRS audit specifically targetting the people who are suffering the most in this economic time can’t be good for anyone. But the IRS has their job too and that’s to raise tax revenue.
We had heard rumours about the new IRS audit handbook that they are using. Yesterday, TaxLoopholes got a copy of it. We are going through it to discover the tricks and traps of REP status in today’s new IRS climate. Please keep watch on the First Class Lounge forum.