Appraiser not a "real estate professional' for IRS purposes and rental property losses on tax return

[Elliott]

I'm not a CPA or a tax preparer, and not giving tax advice, but Perplexity AI said:

 

[glenn walker]

I think you may be pushing the envelope a bit far and your CPA may be saving you from a major audit. But it's your decesion to make and your money.

Remember there are Bulls-Bears and Pigs and you don't want to become the pig when it comes to the IRS.

If you've never been in a big battle with them you won't understand how they can use unlimited funds to break you and those Tax Attorneys cost big $$$.Lol

 

[Elliott]

Coop,
Is this about avoiding paying FICA? Brokers pay. Appraisers pay. I would think if you manage rentals, especially others, you pay. [not giving advice].

 

[Fernando]

File different schedules for different entities. Would not the result be the same for the bottom line of tax liability?

1. Schedule 1 (Additional Income and Adjustments to Income): Used to report additional income and adjustments to income.
2. Schedule 2 (Additional Taxes): Used to report additional taxes paid.
3. Schedule 3 (Additional Credits and Payments): Used to report additional credits and payments.
4. Schedule A (Itemized Deductions): Used to itemize deductions.
5. Schedule B (Interest and Ordinary Dividends): Used to report interest and ordinary dividends.
6. Schedule C (Profit or Loss from Business): Used for business profit or loss.
7. Schedule D (Capital Gains and Losses): Used to report capital gains and losses.
8. Schedule E (Supplemental Income and Loss): Used for supplemental income and loss.

What's the issue?
Rental income reported on Schedule E.
All your business income (appraisal and broker) reported on Schedule C.

 

[ZZGAMAZZ]

Certified Appraiser for decades. Also have Brokers license that I rarely use but only to acquire rental property for my own portfolio.
Now have more than a dozen SFR rental properties.
In past, I have always been able to use my rental property "losses" (with depreciation) against my appraisal income. This depreciation "losses" have been a defining factor for me acquiring new rental property.
Now, CPA is telling me that I have to show a log that my hours of managing my rental properties exceeds my hours of appraisal for my rental "losses" to offset my appraisal income?
When I asked why this was this year I got this response from CPA.

"The IRS definition of real estate professional does not specifically address appraisal work. We are seeing interpretations of the definition that appraisal work does not qualify."

I got this response from AI Copilot when I was searching for my own answers.

"Real estate appraisal is generally not considered a "real property trade or business" under IRS guidelines for the purposes of qualifying as a real estate professional. The IRS defines real property trades or businesses to include activities like development, construction, acquisition, conversion, rental, operation, management, leasing, or brokerage of real property. Appraisal activities are typically not included in this list.
If you're aiming to qualify as a real estate professional for tax purposes, it's important to focus on activities that align with the IRS's definitions."

Anyone else had or have this issue prop up?
Solutions?
Is there a way to report my "consulting" income under my Broker's license to solve this issue?
Or, should I just shop for a new CPA on April 16th?

Dont know if this is peertinent or not, but the individal who filed my taxes for several years--high powered Orange County, CA, preparer with fancy cliebt list--filed my personal taxes and then my business taxes. However, the CPA who prepares my taxes now reqires me to file my personal & my real estate sales return & also my appraisal return--based on his perspective that my salesperson revenue is payable to me, but my appraisal revenue is payable to my corporation. I got no idea which is "correct," or how/why different tax preparers have such different interpretations of tax standards-although the previous prepared egged me over n over n over to appraise properties that I own based on his perspective that "nobody will ever see the appraisals." I refused to do that.