Real Estate Professionals
At Moskowitz, LLP, we understand the professional, contract, and tax issues that face real estate professionals.
If you are facing a tax audit, are embroiled in a commission dispute, and/or have been accused of a serious disciplinary matter, our real estate and tax lawyers can help. We combine our knowledge of these different, yet interconnected, areas in a comprehensive approach for the ultimate benefit of our clients.
Passive loss rules and special tax benefits for real estate professionals
For most real estate investors, passive losses may be used only to offset passive income. Even for taxpayers who actively participate in real estate activities by managing their rental properties, there is a special allowance of $25,000 ($12,500 if married filing separately, and living apart). This offset is reduced by 50% of the amount of adjusted gross income (AGI) that exceeds $100,000 ($50,000 if married filing separately) and completely phases out when AGI reaches $150,000 ($75,000 if married filing separately).
The IRS has special rules, however, for individuals in a trade or business involving real property. These special rules provide significant tax benefits. Those who qualify as a real estate professional under IRC Sec. 469(c)(7) may apply all losses connected with their real estate investments without limitation.
You must satisfy a number of requirements for this special tax treatment, which the IRS frequently denies. First, you must prove to the court that you spent more than 750 hours during the tax year “materially participating” in your real estate activities. You must also show that more than 50% of the services you performed during the tax year were dedicated to your real property business.
Our real estate and tax law professionals have worked successfully on behalf of numerous clients before the IRS. We provide unparalleled legal services in connection with audit representation and tax litigation. We also help our real estate professional clients understand the legal requirements to qualify for special tax benefits and ensure that your recordkeeping can withstand an IRS audit.
To learn more about the special tax rules for real estate professionals, see our 2-part blog series on this topic.
In recent years we have seen an increasing number of clashes between sellers, buyers, brokers, and/or agents. Unfortunately, there is no shortage of people who try to avoid compensating a real estate professional despite their tremendous efforts in bringing about a successful transaction. At the same time, we have seen our share of real estate professionals who have demanded commissions that they did not earn.
Our lawyers have successfully negotiated and litigated numerous disputes over independent contractor agreements and the payment of commissions, including commission disputes triggered by the resignation or termination of a real estate agent or the closing of a brokerage firm. We also represent the interests of real estate professionals at procuring cause/arbitration hearings.
The California Bureau of Real Estate (BRE) is aggressive in investigating alleged misconduct on the part of real estate brokers, agents, and appraisers. Common grounds for discipline include misrepresentation, improper trust fund recordkeeping and deficiencies, and other unlicensed activities. Sanctions include (but are not limited to) administrative fines, license suspension or revocation, civil and criminal penalties.
Our firm provides professional and comprehensive legal counsel during formal investigations and at disciplinary hearings to protect your professional license and secure your livelihood.
Legal and tax services for real estate professionals
Moskowitz, LLP is a tax and real estate law firm based in San Francisco, California, with extensive experience protecting both the rights and the assets of real estate professionals. Contact our team today.