Tax crew:Is Not-for-profit rental a"property held for the production of income"?

[noviapriani]

Technically a not for profit rental does generate some income, though the net income is negative after all the deductions. So does that make it a property held for the production of income (in Federal income tax context)?

[1713483594]

1713483594

[1713483594]

1713483594

[sana8410]

Can you clarify on what you mean by a "not for profit rental".

[noviapriani]

Can you clarify on what you mean by a "not for profit rental".

You rent without the intention of making profit. The loss caused by the rental that you are allowed to deduct is limited to the income from it. You can't deduct excess loss against your main income.
Its a classification by the irs

[umair127]

Can you clarify on what you mean by a "not for profit rental".

You rent without the intention of making profit. The loss caused by the rental that you are allowed to deduct is limited to the income from it. You can't deduct excess loss against your main income.
Its a classification by the irs

I don't think he was asking you to write a definition. I think he was asking you what possible use you would have for that classification. It doesn't have a lot of application to the average person. Why would you be considering using it?

[Mobius]

If you have a rental property that generates negative income then the property itself would not be treated any differently then if the property was profitable for you. The only real difference is that you would have made a bad investment.

[Rigon]

If you do not have a net profit from rents in 3 out of the last 5 years, then the property is presumed to be rented not for profit. In that case, you cannot offset excess losses against other income--only income from the property. You should see a tax professional, though, if you have questions.

[zolace]

I'm not a tax / law guy, but just economically speaking if you are paying yourself a salary then you are receiving income from the properties. Profit and income are two different economic concepts.

[Fray]

If you do not have a net profit from rents in 3 out of the last 5 years, then the property is presumed to be rented not for profit. In that case, you cannot offset excess losses against other income--only income from the property. You should see a tax professional, though, if you have questions.

This doesn't sound right to me. It sounds like what you are saying is that if you make a bad investment decision then you will be penalized by the IRS by not being able to apply losses against your other gains.