IRS CCA: Net Rental Income Exclusions From Self-Employment Tax (IRC §1402)

Whether an activity is a “rental activity” under the passive loss rules of tax code Section 469(c)(2) is not determinative of whether the exclusion in Section 1402(a)(1) applies, the Chief Counsel’s Office advised. In situations not involving a real estate dealer, net rental income from the rental of living quarters is considered “rentals from real estate” excluded from net earnings from self employment (NESE) when no services are rendered for the occupants. However, if services are rendered for the occupants and the services rendered (1) are not clearly required to maintain the space in a condition for occupancy, ...