Let’s say you own the building.

Now, let’s say that you rent this building to your business.

With no tax planning, you have a self-rental, and that

makes rental income from this building nonpassive, meaning that it cannot offset any passive losses1 (very bad); and

makes rental losses from this building passive losses, meaning that you likely cannot deduct the losses this year2 (also very bad).

So, there you have it: with no tax planning, you get the worst of both worlds.

Solution

But wait—there’s a solution (often overlooked).

Under a special grouping rule, you ... Log in to view full article.