Question

which of the following taxpayers may potentially benefit from the safe harbor election allowing of up to 20% of passive rental income

a john whi owns 2 residential rental rental properties. he is a full tome technician but actively participates in his rental activities

b louise a retired taxpayer who has passive income from 16 properties that she owns. she spends 25 hrs a mth participating in her tental properties

c tyler who occasionally rents his personal residence thru an online rental platform

d marianne who owns a duplex and lives on one side and rents out the other to her elderly aunt at less tgan fmv rent

Answer 1

Answer.

The correct answer is b.

Reasoning.

a. The real estate enterprise should not consist of commercial and residential together. John rents his residential property, hence ineligible.

b. Another condition is that a taxpayer must perform at least 250 hours of rental services. Louise performed 400 hours (25 per month),  hence she is eligible.

c Tyler rents personal residence, hence ineligible.

d. Marianne also rents personal residence. She is also ineligible.