United States

Real estate 2017 tax year in review–And a look ahead


With 2018 just around the corner, the real estate industry has been actively tracking the fast-moving House and Senate tax reform proposals. While the December 15, 2017 release of the proposed final bill (H.R. 1) provides helpful clarity on many fronts, answers to certain questions are still elusive (or at the very least, not entirely free from doubt). Nonetheless, 2017 did bring us certain legislative developments that are now in the books including the new partnership audit rules, new rulings on real estate professionals, and some clarifying rules impacting real estate investment trusts (REITs).

In case you missed reading about these issues (or if you want a refresher), the following articles provide noteworthy updates and insights on the real estate tax highlights of 2017.

Also included are annual tax planning resources, the year-end tax and accounting webcast presentation, plus some thoughts on what the real estate industry can expect in the months ahead.

Partnership audit rules

This year the IRS formally released proposed regulations governing the new centralized partnership audit regime. This regime, enacted under the Bipartisan Budget Act of 2015 (BBA), enables the IRS to assess and collect tax at the partnership level.

  • IRS issues proposed regulations for new partnership audit procedures
    Proposed regulations would implement most aspects of the new audit regime, some issues were reserved on pending legislative changes.
  • Proposed partnership audit regulations released by the IRS
    IRS releases proposed regulations governing new centralized partnership audit regime after regulatory freeze delayed initial guidance.
  • New partnership audit rules demand attention: a front row perspective
    If you have a partnership or LLC, it’s time to walk through the basic tax and business issues that may arise with the new audit rules.

Real estate professionals

The real estate professional rules under section 469 were enacted as part of the Tax Reform Act of 1986. The real estate professional rules are not new, but recent legislation, court decisions and increased IRS audit activity has renewed discussion in this area.

  • Are you a materially-participating real estate professional?
    Taxpayers should not assume that simply working in real estate satisfies the tests to qualify as a real estate professional.
  • Tax Court denies taxpayer’s loss on real estate activities
    The U.S. Tax Court has reiterated that contemporaneous documentation is important when substantiating activity to avoid passive treatment.

Real estate investment trusts

A REIT is a complex entity designed to provide all investors the opportunity to invest in commercial real estate in a tax efficient manner. REITs have become a popular investment vehicle around the world. While 2017 did not bring any major REIT developments, certain clarifying guidance was issued.

  • T.D. 9810 – Final regs on transfers of property to REITs (Reg. sections 1.337(d)-7(b)(2)(iii) and 1.337(d)-7(g)(2)(iii)
  • Rev. Proc. 2017-45 – Guidance on stock distributions by REITs

The links below provide helpful background on REITs.

  • The ABCs of REITS
    REITs are becoming increasingly popular, but along with many valuable benefits come strict compliance rules that must be considered.
  • Navigating REIT income tests
    Income testing is a vital aspect of compliance for real estate investment trusts. Learn more about the two types of income tests.

Year-end tax and accounting webcast

View this update on tax and accounting developments, trends and policies having an impact on the real estate industry

Tax reform

With the Tax Cuts and Jobs Act moving through Congress, businesses leaders need to stay aware of what is happening—and how tax reform may affect business planning. We are continually monitoring the latest revisions of the proposed legislation, so that you understand what to expect and the potential impact to your tax planning process. Visit our Tax Reform Resource Center for further information. Our recent tax insight article discusses key tax issues for real estate investors under the new tax legislation.


Real Estate Insights newsletter

Get the real estate insights you want delivered right to your inbox.

Contact Our Team

Richard Edelheit
National Real Estate
Practice Leader