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. 

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}