Treasury finalizes real estate safe harbor for qualified business income deduction

The IRS and the U.S. Treasury Department issued a safe harbor in Revenue Procedure 2019-38 on Sept. 24, 2019, to help resolve uncertainty about when an interest in rental real estate rises to the level of a trade or a business under Section199A of the Internal Revenue Code (IRC). Taxpayers may still qualify for the deduction without the safe harbor if they otherwise meet the definition of a trade or business. Revenue Procedure 2019-38 applies to taxable years ending after Dec. 31, 2017, and incorporates IRS and Treasury considerations following public comment on Notice 2019-07, an earlier pronouncement that provided for a similar safe harbor. Taxpayers may rely on the safe harbor in Notice 2019-07 for the 2018 taxable year. 

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