I have a client that owns one commercial building that she rents to an unrelated restaurant. We report the activity (always net income) on her Schedule E. I am confused about the conflicting opinions on if this activity qualifies for the QBI deduction.
The safe harbor threshold would be difficult to reach due to the 250 hour requirement.
Looking at tax cases - the Hazard Case seems to point to a single rental qualifying for the QBI deduction.
What are your thoughts?
Unfortunately, there is no clear-cut answer and it is always a facts-and-circumstances thing.
Find out how much activity your client does towards the rental. If the just collect rent once a month and pay the mortgage and taxes, no. If they do lots of work and planning and repairs and more, maybe.
As a general guideline, I reference the 250 hours for the Safe Harbor. How far away are they from it? If a total of 200 hours is put in, then it may be a good case to be called a business. If only 50 hours are put in, probably not.