D. Stussy wrote:
- quote -

I haven't seen anything in any of the replies of the effect
of combining units on the passive activity rules. If TP
combines all of the units in a single propery, he is
treating them all as a single activity. If he has passive
loss carryovers, sale of one unit will not trigger the
recapture of these losses. If he only has one activity, ALL
units must be sold for the rule on current recapture of
suspended losses on disposition.

On the other hand, if he shows them individually, any
suspended losses on a given unit can be recaptured on the
sale of just that unit.

How significant this is cannot be determined from the facts
given.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

D.F. wrote:
- quote -

Your inference is incorrect.

Fewer columns often means that the taxpayer is hiding
something that needs to be reported. In this case,
combining two or more rentals into a single column, can be a
technique used to hide the fact that one of the rentals was
vacant all year (i.e. zero gross rents) - and that maybe
it's not truly a rental at all.

- quote -

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

D. Stussy wrote:

- quote -

I infer that fewer columns often results in lower tax. How
does that occur? Do losses in one column not cancel gains in
another column?

In schedule Cs I can see that the self employment tax would
be higher where one schedule C has a loss and another has a
profit. Perhaps there are effects beyond self employment tax
for schedule C also.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"D. Stussy" wrote:

- quote -

Then what does a jury make of it when an att'y promises
them," The evidence you will hear will indicate..." :-) I
think the distinction is a fig leaf, given the need for an
examiner to cease an examination at the point there's
evidence of criminal fraud. 5th Amendment, they say, maybe
4th too.

Or a rose by any other name. None of the facts, even prima
facie false documents, undergo any eucharistic-like change.
But rather an epiphany occurs -- preferably after t/p is
given the common courtesy of listening to his inculpatory
statements. And indications are now evidence, and a fraud
referral is prepared.

Reg,
Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

Please note that I said, "[A]n indication of fraud." That
is not the same as saying that it in itself IS fraud. As
noted in another response, I have had a successful [civil]
fraud case that had this type of rental "underreporting,"
along with its other problems.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

You may beg to differ, but one of my SUCCESSFUL fraud cases
when I worked for the IRS had exactly this type of issue.
The taxpayer in question had 9 separate properties (none
adjacent to any other) yet reported them as 7 columns on
Schedule E. The taxpayer also had other problems, but his
"masking" of how many rentals he had was certainly a factor
in the approval of the IRC 6653(b) penalty [now no longer in
the law].

Note the criteria I used for grouping. I grouped according
to what would also be the logical unit(s) for selling or
otherwise disposing of the property. As such (and I believe
you agree with this, although you arrive at it via different
means), as long as each separate (or separable) passive
activity is properly and uniquely identified (as separate
from the others), then there isn't a problem.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"D. Stussy" wrote:

- quote -

Oh, my... No one has reacted to this yet, but I'll say
let's not alarm readers here, by suggesting IRS normally
thinks like that on such a mundane matter. The only example
I can think of is where the t/p may be deducting the costs
of his/her personal residence among the lumped rentals.
However, the tax deficiency on that typically is relatively
small as fraud cases go. And if the only clear and
convincing evidence is the mere inference of the "lumping,"
IRS would be stretching here, IMO.

I remember arguing the merits of a marginal (evidence-wise,
not $) civil fraud case with an IRS Counsel type who could
be a bit gruff. He told me, "For your information,
technically I only need $1 of provable fraud, but where the
#%&* is even that?" And that was despite the fact that the
t/p had petitioned Tax Court and was poised to prosecute the
case herself "pro se." IRS hates to lose in court in
general, but if they might lose, not like that!

Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

I would beg to differ with Stussy regarding the columnar
rrequirements in Schedule E and the indication of fraud. As
long as none of the rental properties is deemed to be
asosciated with a non-passive activity, in which case it
needs to be aggregasted with that activity, the taxpayer can
choose how to define each rental activity. In this
situation, for example, the taxpayer might choose to combine
all the apartments (except the one T lives in) as one
activity (one column), with the house being a second
activity and the cottages a third. Or, the taxpayer may
choose to have all properties on Anonymous Ave. be one
activity, again except for the one he lives in.

To make an informed choice of how to define the activities
rests on what happens wnen a property is sold. If it is part
of a larger group of properties, and there are passive
losses associated with the activity, the passive losses may
not be released, because there hasn't been a disposition of
the entire activity. Once the activity grouping is defined,
it continues to future years.

For example, I have a client with multiple properties in
several locations. Because passive losses are not an issue
for this client (they are all owned free and clear), we have
chosen groupings based on geographic criteria or by the
condominium structure. So for 40-some properties, we happen
to have 5 columns.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

On Wed, 22 Dec 2004 jm_1951[at]yahoo.com wrote:

- quote -

4 Columns (one per structure), unless more than one is built
on the same lot as per the county assessor.

- quote -

With a single loan, that implies that all 4 structures are
on the same lot. That implies that only one column is
needed. However, as they have different street addresses,
one column per address is more appropriate.

If none were adjacent properties, then multiple columns must
be used. Not doing so is a fraud indication for the IRS.
Multiple units within the same structure should use the same
column.

- quote -

See above.

- quote -

You must exclude those expenses attributable to the unit you
occupy (and include the interest, taxes, etc., as allowable
for that unit on Schedule A).

- quote -

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

jm_1951[at]yahoo.com wrote:

- quote -

I would use four columns, combining the five apartments
since they're in one building.

- quote -

That does complicate things. I would suggest you pick an
apartment and stick to it, otherwise a lot more
recordkeeping.

Merry Christmas,
Harlan Lunsford, EA n LA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

jm_1951[at]yahoo.com wrote:

- quote -

You should hire professional help at least for this year.
You need to have depreication, as well as income and
expenses for each address.

Each address dictates how many columns you need on Sched. E.

Missy Doyle

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I have a property with rental units, comprising a house at #
x Anonymous Ave, and a building with 5 apartments and two
freestanding cottages at # (x + 1) Anonymous Ave.

Total 8 rental units all contiguous, one of which I am
living in. The whole property is financed by one business
loan mortgage.

Do I need to have 8 columns on Schedule E, with expenses for
tools, taxes, utilities, interest, depreciation pro-rated
for each, or can I combine all into 1 column on the Schedule
E?

As I am living in one of the apartments, presumably I cannot
depreciate it. However my intention is to move between
apartments as they fall vacant and to remodel them while
living in them. How will this complicate my tax return?

I would very much appreciate any helpful comments.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->