October 21, 2025 • 29 mins
In this Episode of the Teaching Tax Flow Podcast, hosts Chris and John are joined by Jeremy Wells, PhD, CPA, EA, to unravel one of the most misunderstood areas in tax strategy — Material Participation.
Jeremy, known for blending his academic background with real-world tax expertise, breaks down what truly defines material participation and why it matters so much for real estate investors, high-income earners, and business owners. This episode provides a clear and actionable discussion of IRS Section 469, passive activity rules, and how to correctly apply the “seven tests” to determine whether income is passive or active.
Listeners will gain practical insights on documentation, common misconceptions, and how education remains key to staying compliant while maximizing benefits.
Key Takeaways
• Material participation determines whether you can use passive losses to offset active income.
• The IRS defines seven tests for material participation under Section 469 — understanding which applies to your situation is critical.
• Proper documentation (time logs, spreadsheets, or tracking apps) is essential for substantiating material participation claims.
• Not every real estate investor qualifies as a “real estate professional” for tax purposes — W-2 employees often don’t meet the test.
• Continuous education is vital for both tax professionals and clients to navigate evolving tax law and avoid misinformation.
Notable Quotes
• “We can’t really shut down bad information. All we can do is fight against it with good information.” — Jeremy Wells
• “The goal here, if you’re the taxpayer, is to try to have active income offset with those passive losses.” — Jeremy Wells
• “Just because you have a real estate license doesn’t make you a real estate professional for tax purposes necessarily.” — Jeremy Wells
• “You need to keep that contemporaneous log… just like mileage tracking for your real estate portfolio.” — Jeremy Wells
• “Education is still a key part of the work that I’m trying to do.” — Jeremy Wells
Resources
• Teaching Tax Flow Website: https://www.teachingtaxflow.com
• Defeating Taxes Community: https://www.defeatingtaxes.com
• Teaching Tax Flow YouTube Channel: https://www.youtube.com/@TeachingTaxFlow
Episode Sponsor:
Strategic Associates, LLC
Roger Roundy
www.linkedin.com/in/roger-roundy-86887b23
- (00:00) - Demystifying Material Participation for Taxpayers and Investors
- (02:51) - From Academia to Accounting: A Journey of Career Change
- (07:17) - Understanding Material Participation and Passive Activity Loss Rules
- (17:33) - Understanding Real Estate Professional Status for Tax Purposes
- (21:20) - Tracking Hours and Activities for Real Estate Tax Benefits
- (26:00) - Jeremy Wells Discusses Tax Education and Client Engagement
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
John Tripolsky (00:03):
Hey, everybody, and welcome back to the teaching
tax flow podcast today episode158. We are gonna demystify
material participation. Whatthat means and what that
doesn't. But also, before we getinto it, let's take a brief
moment and thank our episodesponsor.
Ad Read (00:22):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
successful entrepreneur who isfrustrated by having to pay
$75,000 or more of annual taxliability? If so, Strategic
Associates can help. Your firststep to saving thousands, if not
hundreds of thousands, is tocontact Roger Roundy at
(00:43):
Roger@Strategicag.net or bycalling (801) 641-2956, and be
sure to tell them TTF sent you.
John Tripolsky (00:53):
Alright, everybody. We are back here
again on the teaching tax flowpodcast. As you've seen in the
title, read in the show notes,hopefully, you can see or read
one of the two, hopefully, both.But we are gonna answer that
question, right, of what is, orI should say, we are gonna
demystify what exactly materialparticipation is and is not as
always, but we gotta welcome himback, I guess. Chris Pacquero,
(01:17):
welcome back to your own show,sir.
What's happening, bud?
Chris Picciurro, CPA (01:19):
It is an honor to be back. I'm so excited
about our guest today. We'regoing to demystify a concept
that's extremely challenging fortaxpayers, especially business
owner and and real estateinvestors to understand and to
grasp. And we our guest today isa huge overachiever in a
(01:39):
positive way. We talk about taxprofessionals, and and we we
hold both enrolled agents andCPAs in such high regard.
But he has both thosedesignations. So this that's
pretty sweet. And and and we'reexcited to have him. He also
hosts his own podcast. We'regonna talk about but, I'm
excited to welcome Jeremy Wellsto the Teaching Tax Flow
(02:02):
podcast.
Thank you so much for joiningus.
Jeremy Wells, EA, CPA (02:05):
Thank you. It's really an honor and
privilege to be here. I've lovedthe show, love, what you're
doing to help spread the wordabout good ways of approaching
taxes and tax strategy fortaxpayers out there. There's a
whole bunch of junk informationout there, and, you know, we
can't really shut it down. Allwe can do is fight against it
with good information.
(02:26):
So thank you for putting thisout there.
Chris Picciurro, CPA (02:28):
Our pleasure. And I had I had the
pleasure of meeting Jeremy inFlorida, actually, at at a
taxposium conference about ayear year and a few months ago.
And, you know, and and that wasgreat. I know he's a resident of
of Northeast Florida, so it wasa quick little jump over to
Orlando. And it was in July, sowe were pretty much staying
(02:49):
inside at that point.
Yep.
Jeremy Wells, EA, CPA (02:50):
You know? Absolutely. You gotta stay in
the in the air conditioner herein Florida in the summer,
especially in Orlando. It thethe humidity is is just not
worth going outside during themiddle of the day there.
Chris Picciurro, CPA (03:02):
Well, Jerry, before we jump into
material participation, can yougive us a little bit of more
information about your journey?I and and what I really love
about your podcast and the workyou do, is that that you came
from academia. Right? So so andand now you're taking that into
practice. So I feel like youradvice is very academically
sound or research sound eventhough you might but but also
(03:25):
practical.
Practical.
Jeremy Wells, EA, CPA (03:26):
That's well, thank you. That's what I
that's what I aim for. So Ithat's right. I straight out of
undergrad, I had my sight set onlaw school, actually, but that
changed. A few friends of minefrom undergrad who were a year
or two ahead of me, they cameback to campus to visit, told me
how great grad school is.
(03:47):
I had always wanted to teach,Teaching is is in my roots, and
so looked at grad school,decided teaching would be the
right path for me, and so wentto grad school. I spent six
years at LSU. If I'd gonesomewhere a little less fun than
(04:08):
Baton Rouge, I might have gottendone a little quicker. I
probably should have gotten donein four or five years, but, you
know, that's okay. Baton Rougewas a good place to spend six
years.
But got a PhD in politicalscience, taught at Texas State
University for five years,taught international relations
actually. So how how am I anaccountant now? We'll
Chris Picciurro, CPA (04:29):
go
Jeremy Wells, EA, CPA (04:29):
back to originally the plan was law
school. And so I had taken acouple of business law classes,
and along with that, a couple ofaccounting classes because I
thought I was gonna minor inbusiness. I wanted to focus on
contract law, the business sideof law. So when I was thinking
about, you know, the future withmy wife, especially around the
time my daughter was born, 2017,looking at career prospects in
(04:55):
academia, and it just it justwasn't there. You know, really,
the academic job market hasalways been tough, but really
especially since the GreatRecession.
That's been a really tough jobmarket, and I was looking for
something that not only wouldhave better job prospects, but
something where I might have alittle bit more independence.
You know, not not have to clockin and out five days a week and
(05:17):
commute to work. So thinkingback to some of the things I had
studied in college that weren'twhat I was doing and thinking
about those accounting courses,I actually did pretty well in
them, found it interesting. Theuniversity I was teaching at had
a decent accounting program, soI talked to some of the faculty
there. I also started reachingout to CPAs online and in
(05:40):
person, met a bunch of greatones, decided this is probably
the way I wanna go, and one ofthem recommended looking at the
enrolled agent license, sort ofa quick, a little bit quicker
way, not an easier way, but aquicker way to get into the
profession.
So I started doing that, and inthe meantime, started working on
(06:01):
the CPA, got that a couple yearslater, and have been doing this
for seven or eight years now,and not looking back. Love it.
Chris Picciurro, CPA (06:11):
Well, I the positive of of being a LSU
Tiger is you you've typicallyare gonna have good football,
really good baseball. Yep. Hitor miss on basketball, but
that's alright.
Jeremy Wells, EA, CPA (06:23):
That's okay. That's okay. Yep.
Absolutely.
Chris Picciurro, CPA (06:26):
You got the two big ones. I mean, they
love their baseball is myfavorite sports, and they love
their baseball down there, and Iappreciate that.
Jeremy Wells, EA, CPA (06:33):
And as a grad student, because I was a
student, I had the same accessto all of that as every other
student, but because as a gradstudent I had seniority over all
of the undergrads, so webasically got our pick of season
tickets to the football games,and then it was free admission
to all the other sports. So I II went to the box to watch a lot
(06:53):
of LSU baseball games for sure.Wow.
Chris Picciurro, CPA (06:56):
Yeah. Well, we know you live in Gator
Country now, so we'll we'llwe'll we'll but but
Jeremy Wells, EA, CPA (07:01):
That's right. That's right. Yeah. When
you know, settling down, wifeand kid, the the the sports
thing become a lot it became alot less of an important factor,
in in life. But, yeah, I stillcan't I I catch up with what's
going on there a little bitevery now and then.
Chris Picciurro, CPA (07:16):
Awesome. Well, let's jump into material
participation. Gil, this issomething that I find
challenging to explain, to a a afew different segments of
taxpayers. Taxpayers. Number oneis gonna be your your real
estate investors that thatultimately the that run into
what I call passive activityloss rules.
(07:38):
The other one are people thatinvest in in partnerships in a
limited capacity. And,ultimately, people that have
losses that are on their taxdocuments, but they don't get to
deduct them in their currentyear. That's about as simple as
I could say. Those are thepeople that in fact, can you
kinda talk about a little bitabout what material
(08:00):
participation is?
Jeremy Wells, EA, CPA (08:01):
Yeah. It's always a fun conversation.
And by fun, I mean not fun. Whenyou prep a return for real
estate investor, and now youhave to explain why they're
still paying taxes even thoughthey thought they had all these
losses that they could take forthe year. So, yeah, the the gist
here, right, is that you youshould not be able.
(08:27):
Right? And and this isdebatable. Right? I'm not I'm
not taking a position here. I'mjust saying this is what the law
says.
Right? The the gist here is thatyou should not be able to offset
active income. So your yourwages basically, you know, along
with some other stuff. Yourwages with income that is from
(08:48):
activities that you didn'treally put as much work and
effort into. Now, what we meanby work and effort is gonna be
important because even though itfeels like you put a lot of work
and effort into something thatis by definition a passive
activity, that may not actuallyqualify when we're talking about
what material participation is.
(09:10):
Right? So that's that's why, youknow, that's important. We first
have to make that distinctionbetween passive and non passive
income in terms of thinkingabout whether you're to be able
to take those losses or not. Andof course, the goal here, you
know, you're the taxpayer, is totry to have that active income
(09:30):
being offset with those passivelosses. You work and you earn
money, you want to have somepaper losses that you can offset
that with, reduce your taxliability.
Totally understandable. Alright.So how do we know if you can do
that? And the, what we have ishonestly one of the most
(09:52):
complicated code sections,right, in all of the tax code.
And one of the most complicatedsets of regulations that goes
along with that.
But it all comes back to sectionfour sixty nine of the tax code
and that these are the passiveactivity loss rules. And that's
all it is. And so that's whattells us in print whether or not
you're able to actually takethose passive losses and offset
(10:16):
your active income with that.And we, you know, we as the tax
professional, we're readingthrough that. We're breaking
that down.
We're trying to figure out ifthere's any way we can squeeze
some of these rules and applythem to your actual passive
income. And and the trick here,the key, right, is to materially
materially participate.Basically, take that passive
(10:39):
income and you do the right kindof work, and you do enough of
that work throughout the year tomake it to where even though
it's still passive, it's nowactually non passive and we
can't offset your active income.So basically, a lot of the
questions we're asking realestate investors, but then also
business owners and investorswhen it comes to the pass
(11:03):
through income they're getting.So if you're a partner in a
partnership or a shareholder inS corporation, even if you're
even if it's not real estatefocused, right, that that
business, because you're aninvestor who's not maybe
directly involved in the day today operations, you don't
actually work for the company,you're not one of the leaders of
(11:25):
the company, you're just aninvestor and you just put some
money into it, that's bydefinition going to be passive
as well.
So it's beyond just real estate,right? We we've got a lot of
taxpayers out there who findthemselves with this passive
income. And, you know, honestly,they they get a little confused
by that. Right? They feel like,you know, they they've done
enough to earn being able totake advantage of those passive
(11:46):
losses.
And sometimes we have to have ahard conversation with them
about that.
Chris Picciurro, CPA: Absolutely. And that's that's (11:50):
undefined
where, people have to understandone of the three laws of
teaching tax flow. Tax laws arewritten. I mean, tax agencies
are involuntary businesspartner. Tax laws are written to
encourage and discourage certainbehavior, meaning just buying a
short term rental property, justinvesting in oil and gas, for
instance, just buying a rentalprop buying investing in an
(12:12):
apartment complex, even if yourrep status doesn't guarantee you
that you're going to be able todeduct those losses on the
current year tax return.
You have to have materialparticipation, under section
four sixty nine. But the IRS isfriendly enough to give us some
tests.
Jeremy Wells, EA, CPA (12:28):
Yep. Yep. And and they're certain. Right?
Like, they they you know, so sothis comes out of, like I said,
the the regulations, and this isit it's complicated.
Right? There's a lot to this.We're we're up to I wanna say
there's about a dozen differentregulations just under this one
code section. Right? And inparticular, one of them, five t,
(12:52):
the t stands for temporary.
And believe it or not, they'vebeen temporary for a couple
decades now. Right? Like, theythey they're they're about as
close to permanent as you canget and still be temporary. But
anyway, that is where we havethe the seven tests. And for the
most part, most taxpayers arereally only gonna look at two or
(13:14):
three of these.
A couple of them are there.They're just not applicable to
most of the taxpayers that we'regonna work with. Depending on
what you're doing in thatactivity, and and in this case,
like to use the word activitybecause it could be, like I
said, you've invested in apartnership. It could be that
you own a rental. It could bethat you're a passive
(13:37):
shareholder or you're a silentshareholder in an S Corp.
Right? All of these are passiveactivities for the purposes of
four sixty nine. So, you know,is your participation in this
activity going to rise to beingmaterial and therefore unlock
those losses and make them nonpassive for you. And so yeah,
(13:58):
it's just a question of lookingat those seven tests. And like I
said, really, you know, we startwith the first two or three.
Those tend to be one, theeasiest to track and the easiest
to document and make a goodsolid case for, we always come
back to substantiation,especially in these kinds of
things. Remember, we're taking aposition that by definition is
(14:21):
not generally the rule. Right?The the general rule is passive
losses can offset active income.Now there's always the exception
to the rule.
The exception to the rule is ifyou materially participate in
that passive activity, you mightbe able to offset that active
income. So if there's ever aquestion, right, the default
position is, no, you can't dothat unless you've done these
(14:45):
things. You've met one of thesematerial participation tests. So
we always wanna try to documentthat as much as possible just in
case there's ever a questionabout that.
Chris Picciurro, CPA (14:53):
It's yeah. If you and if you're listening
to this and watching it, thinkabout this. Think about these
losses being like a like ahandicap parking spot. By
default, you can't just pullyour car into the handicap spot.
It's there for people thatactually need it, like my dad.
That's why I like kinda liketraveling with my dad. Save some
stuff. But but but it's therefor people that need it
(15:15):
legitimately. So if you'reillegitimately parking in it,
there's the the penalties aresignificant. Your car is gonna
get towed.
There's not a 100% chance you'regonna get caught, so we never
advocate doing anythingunethical. But, but if you if
you meet one of the tests, I e,you either have a temporary
handicap permit or a permanenthandicap permit, slide your car
(15:36):
in there and go about yourbusiness. And that's that's kind
of the way I think about thatsituation.
Jeremy Wells, EA, CPA: Absolutely. Absolutely. I think (15:42):
undefined
that's a great analogy. Youknow, it's something that every
now and then, and we hate to dothat, you know, we're not
looking to enforce, you know, asyour as your tax professional,
as your tax adviser, your taxreturn preparer, we're not
looking to enforce the rules.We're looking to help you make
sure that you're following therules as much as possible.
(16:03):
And so when we, you know, askyou for information or when we
downright insist on information,we're doing that, yes, there is
part of that to protectourselves because we can't
prepare a return in a way thatcould be considered incorrect,
and then therefore that's goingto cause problems for us as the
(16:24):
preparer. If we have, you know,signed our name on that return
as the preparer of that return
Chris Picciurro, CPA (16:28):
Mhmm.
Jeremy Wells, EA, CPA (16:28):
There's a potential for us to have, you
know, some problems with the IRSwith that return if we put
something on there that isn'ttrue. But you as our client, you
know, we're looking out for yourbest interest. We don't want you
to wind up in a fight with theIRS and you don't have the
information and especially thedocumentation to support the
(16:50):
position that we took on thatreturn for you.
Chris Picciurro, CPA (16:53):
Correct. I I saw a return this person has
real estate professional status,rep status, but they invested in
a limited part or they investedas a limited partner in an
apartment syndication. Theydon't have material
participation, and they own 3%.And the previous preparer let
them take that entire loss.Loss.
(17:14):
And it's like you know? So sothat that's that's a that's a
problem. Of those things.
Jeremy Wells, EA, CPA (17:19):
That's a problem.
Chris Picciurro, CPA (17:20):
The problem. So as the so you just
inform them and and, you know,say you you should amend this
return. But so my my point isand this is where I think and I
I don't I'd like to know aboutyour experiences. I feel like
and we're pretty heavy in realestate on our private practice.
Real estate professional statusdoesn't just give you a green
light to write off any type ofreal estate investments.
You still need to meet one ofthese, material participation
(17:43):
tests and have some type ofownership too. Like, in in the
hours, you know, this isn'tnecessarily an hours discussion,
but but in you know, sometimessomeone will say, well, I work
at a I work as at a real estatebrokerage. I'm the office
manager, so I have seven hundredand fifty hours in real estate.
You might, but you don't own anyof that brokerage. So there's
(18:03):
there there are rules.
Jeremy Wells, EA, CPA (18:05):
Yep. Yep. And and that's that's always a
fun thing to because I live inNortheast Florida. And, you
know, the first few years whenwe moved here, I was reaching
out, finding a lot of clientslocally. And Northeast Florida
real estate market has beenrelatively hot, you know, and
(18:25):
growing for a At one pointduring the pandemic, I saw a
statistic somewhere that therewere at one point more real
licensed real estate agents thanthere were homes for sale on the
market.
Like, it's, you know Right. I Ithink that shifted, you know,
(18:45):
over the last year or two. Butit's it's it's a lot here.
Chris Picciurro, CPA (18:50):
And
Jeremy Wells, EA, CPA (18:50):
I've gotten a lot of clients and a
lot of questions about whatexactly is that concept of real
estate professional. I've got areal estate license. Does that
mean I'm a real estateprofessional? I own x number of
properties. Am I a real estateYou know, like, your example, I
work in a brokerage.
Does that make me and it's oneof those things where the the
(19:14):
way we just in common languagewould use a term may not be the
way tax law specifically definesthat term. And this is one of
those cases. Right? Just becauseyou have a real estate license
doesn't make you a real estateprofessional for tax purposes
necessarily. There's more thatyou've gotta be able to show
(19:36):
there.
So it's really important tounderstand what those rules are
and, you know, ideally, for me,work with a tax adviser who
knows those rules and can adviseyou on them.
Chris Picciurro, CPA (19:47):
Right. And we did I think we're gonna redo
a little content because we youknow, being a realtor doesn't
make you a rep status.
Jeremy Wells, EA, CPA (19:54):
Yeah. Exactly.
Chris Picciurro, CPA (19:55):
But you could be rep status without
being a realtor.
Jeremy Wells, EA, CPA: Absolutely. (19:57):
undefined
Chris Picciurro, CPA (19:58):
So you there are different kinds of now
your activity as a realtor,depending on what activity you
are what activities you'reparticipating in, especially if
you're a broker or maybe youthose hours could count. It's
just a matter of it's just youknow, it's it's tough. And
Jeremy Wells, EA, CPA (20:13):
And I and I've had situations where I've
had clients that they they wentand got a real estate license.
They spent a lot of time, andand even a lot of time that
would qualify as materialparticipation into their real
estate activities. They startedputting together a portfolio.
The whole time, they kept theirw two job though. And that's
(20:36):
always a problem, right, for forpeople looking to be considered
for tax purposes a real estateprofessional, because it makes
it really, really difficult, ifnot virtually impossible, to
make the claim that you spent atleast half of your working time
in her real estate profession.
Right? And so you've got a w twowith six figures coming out of,
(20:59):
you know, the investment firmthat you work for or for the,
you know, tech startup that youwork for or whatever it is, you
know, that that that can be adeal breaker, and it usually is.
So it's really important tounderstand all the rules and not
just assume based on what thelabel is that you've met those
qualifications.
Chris Picciurro, CPA (21:19):
Well, when we develop which I've been
telling John kinda tongue incheek, when we develop the
teaching tax flow dating app,there's gonna be swiping going
on. Hey. I'm a rep status. Okay.I wanna I wanna find that sugar
daddy or sugar mama w two or,oh, you have got some activity
losses?
I'm about to exit my business.Let's get together.
John Tripolsky (21:36):
I could see it now. Like, you're there's the
the toolbar. Right? You'reyou're squeezing it out one end
or the other on how much youneed. Right?
That's the real match. And thenthe photo comes afterwards.
Right?
Jeremy Wells, EA, CPA (21:46):
So Absolutely.
Chris Picciurro, CPA (21:47):
As far could you give us a couple tips
as we if it's kinda wrap up onthe practical side of of of
maybe tracking hours, how itworks when you have two spouses.
Maybe can those hours be becombined at all? And just some
practical, again, practicaltips. And we've we've got a a
(22:08):
shameless plug by one of thepodcast sponsors is Reps
Tracker, which is an app I'veused that that helps you track
all this, but you still got youknow, you don't have to use an
app. You could have
Jeremy Wells, EA, CPA (22:18):
a spreadsheet if it's documented
properly. So what what are someof the hacks that you can give
us? Yeah. A 100%. And thatthat's always what I recommend
whether, you know, you'retalking about tracking your
material participation in yourrental portfolio, whether you're
talking about tracking yourincome and expenses for your
(22:39):
business, whether you're talkingabout tracking your mileage.
Right? There's an app for that.Right? That's that saying that's
been around for, you know, what?When they introduced the iPhone,
you know, eighteen years agonow.
You know, we've been we've beensaying there's an app for that.
And there is, and you know, wewe're always going to push for
that because it simplifiesthings. But in the meantime,
(23:00):
just start off with spreadsheet.Right? And when you get sick and
tired of doing it in thatspreadsheet because you feel
like you're constantly in thatspreadsheet logging this stuff,
that's that's when it's time tolook at the app.
Right? Until then, use thespreadsheet because not only
does that save you the cost ofhaving to subscribe to another
app. Right? But it also forcesyou to sit there and think
(23:23):
about, okay, what am I actuallydocumenting here? What is
actually important?
What do I actually need to betracking? And as you manually
enter, you know, each one ofthose rows into that
spreadsheet, you see that buildup over time. And I think
there's a psychological effectthere. But, yeah, absolutely. So
you you need to keep thatcontemporaneous log.
(23:44):
And for those of you who hadbeen small business owners and
you've, you know, worked in abusiness where you had to drive
around, you should have heardthat phrase from tracking your
mileage, which you need to bedoing with your real estate
portfolio also. If you'redriving to go check on your
properties, if you're driving togo make repairs or mow the lawn
or whatever you're doing forthose properties, track the
(24:06):
mileage and then also track thetime. And I would make this two
separate tabs inside that samespreadsheet file, right? You
know, so that you keep it all inone place. But yeah, absolutely.
You need to track the the date,the amount of time, and you
know, what you actually didduring that time. And if you did
(24:26):
multiple things, if you repaireda doorknob, spent a half hour
doing that, and then you mowedthe lawn for an hour, and then
you did some other stuff, Youknow, track each one of those
individually. Yeah. Because, youknow, in your mind, this is all
just working for your realestate portfolio. But there are
rules.
There are certain activitiesthat qualify, and then other
activities that don't qualify.And if you're not a 100% clear
(24:48):
on what qualifies and whatdoesn't, one, ask your tax
adviser. But then in themeantime, just itemize all of
that out and make it a loteasier on yourself during tax
time. But yeah, definitelyrecommend tracking all that, and
you need to be doing itcontemporaneous. Don't wait
until tax time.
Don't wait until, you know, sixmonths or a year later, and then
try to just remember, you know,all those little fifteen,
(25:11):
thirty, sixty minute tasks thatyou completed at your rentals.
Do that at least on a dailybasis, if you're if you're doing
that kind of work at yourrentals.
Chris Picciurro, CPA (25:20):
Well, I appreciate it. I would say, you
know, as we wrap it up, materialparticipation is required to to
take in any type of activity, asyou've said, from non from non
or from passive to nonpassive.
Jeremy Wells, EA, CPA: Absolutely. (25:36):
undefined
Chris Picciurro, CPA (25:36):
Track things. If you tell your tax
professional you hadmiraculously exactly 15,000
miles on your vehicle, theymight not eye roll you out. But
inside, they are, and and that'sokay. We we just do it. You put
out so much great content, notjust professionals, for
entrepreneurs.
Can you let, as we wrap up, leteveryone know how they can find
(25:58):
you? And, obviously, we're gonnaput it in the show notes.
Jeremy Wells, EA, CPA (26:00):
Well, thank you very much. I
appreciate that. So I I write alot of my content is geared
toward other tax professionals,but I do try to make it at least
somewhat accessible to non taxpros if you're kinda on the
nerdy side or you know, if youjust wanna listen to where maybe
your tax pros getting theirideas or information from. But
(26:20):
right now it's, it's mostly twodifferent things. One is a sub
stack that I occasionally sendout, I need to send out more.
But that's jaywells. Tax. Andthen I have the podcast which we
have a new episode, they'reusually around fifty to fifty
five minutes, that's the minimumfor one hour of CE for tax
professionals continuingeducation. That comes out every
(26:42):
other Wednesday. Each episode isis one specific tax topic that I
do a little bit of a fiftyminute deep dive on, go through
the law, but also look at somecase studies, try to make that
make sense to to whoever'slistening to it.
John Tripolsky (26:57):
Awesome. Yeah. We'll definitely we'll drop in
the show notes, as Chrismentioned as well too. And and
Jeremy, my big takeaway fromthis, right, and I'll leave it
kind of at that one is westarted this off talking about
education. Right?
And as a tax pro, I'm gonna makethe assumption that you actually
never stop educating yourclients. Is is that a is that a
correct assumption?
Jeremy Wells, EA, CPA (27:16):
My one of the favorite parts of working in
academia was not lecturing, notresearching and writing,
although I enjoyed all thatwork. It was the office hours.
It was the one on oneconversations with students when
they would come. And a lot oftimes those conversations
wouldn't be anything about theactual coursework we were doing.
It would be about what are theircareer goals?
(27:38):
What are their life goals? Whatare they going through in life
right now that made it to wherethey couldn't get their essay in
on time? Right? Those sorts ofthings. And that's when I got to
transition from being aprofessor to an actual counselor
and in some cases coach.
And I've always tried to captureand keep a little bit of that in
the accounting work that I do.And I've gotten to a point now
to where I feel just confidentenough to not only do that with
(28:02):
clients, but also do that withother tax tax professionals who
are trying to get their start inthis profession as well. So
yeah, absolutely. Definitelydefinitely education is still a
key part of the the work thatI'm trying to do. It's mostly
client work, but trying tofactor in a little bit more of
that kind of work too.
John Tripolsky (28:18):
Awesome. Well, it keeps you sharp. And and,
Chris, good call having Jeremyon with us to talk about this
topic. And, yeah, man, we'll,we'll have you back. So we'll
we'll ping you at some point andharass you to come back on the
show with us.
Jeremy Wells, EA, CPA (28:29):
I appreciate it. I'll be looking
forward to it.
John Tripolsky (28:31):
Show notes, links in there. Click on them,
follow them, and we'll see youback here again next week on the
teaching tax law podcast. Have agreat week, everybody.
Disclaimer (28:40):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(29:02):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained the memorandum.
Hey, everybody, and welcome back to the teaching
tax flow podcast today episode158. We are gonna demystify
material participation. Whatthat means and what that
doesn't. But also, before we getinto it, let's take a brief
moment and thank our episodesponsor.
Ad Read (00:22):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
successful entrepreneur who isfrustrated by having to pay
$75,000 or more of annual taxliability? If so, Strategic
Associates can help. Your firststep to saving thousands, if not
hundreds of thousands, is tocontact Roger Roundy at
(00:43):
Roger@Strategicag.net or bycalling (801) 641-2956, and be
sure to tell them TTF sent you.
John Tripolsky (00:53):
Alright, everybody. We are back here
again on the teaching tax flowpodcast. As you've seen in the
title, read in the show notes,hopefully, you can see or read
one of the two, hopefully, both.But we are gonna answer that
question, right, of what is, orI should say, we are gonna
demystify what exactly materialparticipation is and is not as
always, but we gotta welcome himback, I guess. Chris Pacquero,
(01:17):
welcome back to your own show,sir.
What's happening, bud?
Chris Picciurro, CPA (01:19):
It is an honor to be back. I'm so excited
about our guest today. We'regoing to demystify a concept
that's extremely challenging fortaxpayers, especially business
owner and and real estateinvestors to understand and to
grasp. And we our guest today isa huge overachiever in a
(01:39):
positive way. We talk about taxprofessionals, and and we we
hold both enrolled agents andCPAs in such high regard.
But he has both thosedesignations. So this that's
pretty sweet. And and and we'reexcited to have him. He also
hosts his own podcast. We'regonna talk about but, I'm
excited to welcome Jeremy Wellsto the Teaching Tax Flow
(02:02):
podcast.
Thank you so much for joiningus.
Jeremy Wells, EA, CPA (02:05):
Thank you. It's really an honor and
privilege to be here. I've lovedthe show, love, what you're
doing to help spread the wordabout good ways of approaching
taxes and tax strategy fortaxpayers out there. There's a
whole bunch of junk informationout there, and, you know, we
can't really shut it down. Allwe can do is fight against it
with good information.
(02:26):
So thank you for putting thisout there.
Chris Picciurro, CPA (02:28):
Our pleasure. And I had I had the
pleasure of meeting Jeremy inFlorida, actually, at at a
taxposium conference about ayear year and a few months ago.
And, you know, and and that wasgreat. I know he's a resident of
of Northeast Florida, so it wasa quick little jump over to
Orlando. And it was in July, sowe were pretty much staying
(02:49):
inside at that point.
Yep.
Jeremy Wells, EA, CPA (02:50):
You know? Absolutely. You gotta stay in
the in the air conditioner herein Florida in the summer,
especially in Orlando. It thethe humidity is is just not
worth going outside during themiddle of the day there.
Chris Picciurro, CPA (03:02):
Well, Jerry, before we jump into
material participation, can yougive us a little bit of more
information about your journey?I and and what I really love
about your podcast and the workyou do, is that that you came
from academia. Right? So so andand now you're taking that into
practice. So I feel like youradvice is very academically
sound or research sound eventhough you might but but also
(03:25):
practical.
Practical.
Jeremy Wells, EA, CPA (03:26):
That's well, thank you. That's what I
that's what I aim for. So Ithat's right. I straight out of
undergrad, I had my sight set onlaw school, actually, but that
changed. A few friends of minefrom undergrad who were a year
or two ahead of me, they cameback to campus to visit, told me
how great grad school is.
(03:47):
I had always wanted to teach,Teaching is is in my roots, and
so looked at grad school,decided teaching would be the
right path for me, and so wentto grad school. I spent six
years at LSU. If I'd gonesomewhere a little less fun than
(04:08):
Baton Rouge, I might have gottendone a little quicker. I
probably should have gotten donein four or five years, but, you
know, that's okay. Baton Rougewas a good place to spend six
years.
But got a PhD in politicalscience, taught at Texas State
University for five years,taught international relations
actually. So how how am I anaccountant now? We'll
Chris Picciurro, CPA (04:29):
go
Jeremy Wells, EA, CPA (04:29):
back to originally the plan was law
school. And so I had taken acouple of business law classes,
and along with that, a couple ofaccounting classes because I
thought I was gonna minor inbusiness. I wanted to focus on
contract law, the business sideof law. So when I was thinking
about, you know, the future withmy wife, especially around the
time my daughter was born, 2017,looking at career prospects in
(04:55):
academia, and it just it justwasn't there. You know, really,
the academic job market hasalways been tough, but really
especially since the GreatRecession.
That's been a really tough jobmarket, and I was looking for
something that not only wouldhave better job prospects, but
something where I might have alittle bit more independence.
You know, not not have to clockin and out five days a week and
(05:17):
commute to work. So thinkingback to some of the things I had
studied in college that weren'twhat I was doing and thinking
about those accounting courses,I actually did pretty well in
them, found it interesting. Theuniversity I was teaching at had
a decent accounting program, soI talked to some of the faculty
there. I also started reachingout to CPAs online and in
(05:40):
person, met a bunch of greatones, decided this is probably
the way I wanna go, and one ofthem recommended looking at the
enrolled agent license, sort ofa quick, a little bit quicker
way, not an easier way, but aquicker way to get into the
profession.
So I started doing that, and inthe meantime, started working on
(06:01):
the CPA, got that a couple yearslater, and have been doing this
for seven or eight years now,and not looking back. Love it.
Chris Picciurro, CPA (06:11):
Well, I the positive of of being a LSU
Tiger is you you've typicallyare gonna have good football,
really good baseball. Yep. Hitor miss on basketball, but
that's alright.
Jeremy Wells, EA, CPA (06:23):
That's okay. That's okay. Yep.
Absolutely.
Chris Picciurro, CPA (06:26):
You got the two big ones. I mean, they
love their baseball is myfavorite sports, and they love
their baseball down there, and Iappreciate that.
Jeremy Wells, EA, CPA (06:33):
And as a grad student, because I was a
student, I had the same accessto all of that as every other
student, but because as a gradstudent I had seniority over all
of the undergrads, so webasically got our pick of season
tickets to the football games,and then it was free admission
to all the other sports. So I II went to the box to watch a lot
(06:53):
of LSU baseball games for sure.Wow.
Chris Picciurro, CPA (06:56):
Yeah. Well, we know you live in Gator
Country now, so we'll we'llwe'll we'll but but
Jeremy Wells, EA, CPA (07:01):
That's right. That's right. Yeah. When
you know, settling down, wifeand kid, the the the sports
thing become a lot it became alot less of an important factor,
in in life. But, yeah, I stillcan't I I catch up with what's
going on there a little bitevery now and then.
Chris Picciurro, CPA (07:16):
Awesome. Well, let's jump into material
participation. Gil, this issomething that I find
challenging to explain, to a a afew different segments of
taxpayers. Taxpayers. Number oneis gonna be your your real
estate investors that thatultimately the that run into
what I call passive activityloss rules.
(07:38):
The other one are people thatinvest in in partnerships in a
limited capacity. And,ultimately, people that have
losses that are on their taxdocuments, but they don't get to
deduct them in their currentyear. That's about as simple as
I could say. Those are thepeople that in fact, can you
kinda talk about a little bitabout what material
(08:00):
participation is?
Jeremy Wells, EA, CPA (08:01):
Yeah. It's always a fun conversation.
And by fun, I mean not fun. Whenyou prep a return for real
estate investor, and now youhave to explain why they're
still paying taxes even thoughthey thought they had all these
losses that they could take forthe year. So, yeah, the the gist
here, right, is that you youshould not be able.
(08:27):
Right? And and this isdebatable. Right? I'm not I'm
not taking a position here. I'mjust saying this is what the law
says.
Right? The the gist here is thatyou should not be able to offset
active income. So your yourwages basically, you know, along
with some other stuff. Yourwages with income that is from
(08:48):
activities that you didn'treally put as much work and
effort into. Now, what we meanby work and effort is gonna be
important because even though itfeels like you put a lot of work
and effort into something thatis by definition a passive
activity, that may not actuallyqualify when we're talking about
what material participation is.
(09:10):
Right? So that's that's why, youknow, that's important. We first
have to make that distinctionbetween passive and non passive
income in terms of thinkingabout whether you're to be able
to take those losses or not. Andof course, the goal here, you
know, you're the taxpayer, is totry to have that active income
(09:30):
being offset with those passivelosses. You work and you earn
money, you want to have somepaper losses that you can offset
that with, reduce your taxliability.
Totally understandable. Alright.So how do we know if you can do
that? And the, what we have ishonestly one of the most
(09:52):
complicated code sections,right, in all of the tax code.
And one of the most complicatedsets of regulations that goes
along with that.
But it all comes back to sectionfour sixty nine of the tax code
and that these are the passiveactivity loss rules. And that's
all it is. And so that's whattells us in print whether or not
you're able to actually takethose passive losses and offset
(10:16):
your active income with that.And we, you know, we as the tax
professional, we're readingthrough that. We're breaking
that down.
We're trying to figure out ifthere's any way we can squeeze
some of these rules and applythem to your actual passive
income. And and the trick here,the key, right, is to materially
materially participate.Basically, take that passive
(10:39):
income and you do the right kindof work, and you do enough of
that work throughout the year tomake it to where even though
it's still passive, it's nowactually non passive and we
can't offset your active income.So basically, a lot of the
questions we're asking realestate investors, but then also
business owners and investorswhen it comes to the pass
(11:03):
through income they're getting.So if you're a partner in a
partnership or a shareholder inS corporation, even if you're
even if it's not real estatefocused, right, that that
business, because you're aninvestor who's not maybe
directly involved in the day today operations, you don't
actually work for the company,you're not one of the leaders of
(11:25):
the company, you're just aninvestor and you just put some
money into it, that's bydefinition going to be passive
as well.
So it's beyond just real estate,right? We we've got a lot of
taxpayers out there who findthemselves with this passive
income. And, you know, honestly,they they get a little confused
by that. Right? They feel like,you know, they they've done
enough to earn being able totake advantage of those passive
(11:46):
losses.
And sometimes we have to have ahard conversation with them
about that.
Chris Picciurro, CPA: Absolutely. And that's that's (11:50):
undefined
where, people have to understandone of the three laws of
teaching tax flow. Tax laws arewritten. I mean, tax agencies
are involuntary businesspartner. Tax laws are written to
encourage and discourage certainbehavior, meaning just buying a
short term rental property, justinvesting in oil and gas, for
instance, just buying a rentalprop buying investing in an
(12:12):
apartment complex, even if yourrep status doesn't guarantee you
that you're going to be able todeduct those losses on the
current year tax return.
You have to have materialparticipation, under section
four sixty nine. But the IRS isfriendly enough to give us some
tests.
Jeremy Wells, EA, CPA (12:28):
Yep. Yep. And and they're certain. Right?
Like, they they you know, so sothis comes out of, like I said,
the the regulations, and this isit it's complicated.
Right? There's a lot to this.We're we're up to I wanna say
there's about a dozen differentregulations just under this one
code section. Right? And inparticular, one of them, five t,
(12:52):
the t stands for temporary.
And believe it or not, they'vebeen temporary for a couple
decades now. Right? Like, theythey they're they're about as
close to permanent as you canget and still be temporary. But
anyway, that is where we havethe the seven tests. And for the
most part, most taxpayers arereally only gonna look at two or
(13:14):
three of these.
A couple of them are there.They're just not applicable to
most of the taxpayers that we'regonna work with. Depending on
what you're doing in thatactivity, and and in this case,
like to use the word activitybecause it could be, like I
said, you've invested in apartnership. It could be that
you own a rental. It could bethat you're a passive
(13:37):
shareholder or you're a silentshareholder in an S Corp.
Right? All of these are passiveactivities for the purposes of
four sixty nine. So, you know,is your participation in this
activity going to rise to beingmaterial and therefore unlock
those losses and make them nonpassive for you. And so yeah,
(13:58):
it's just a question of lookingat those seven tests. And like I
said, really, you know, we startwith the first two or three.
Those tend to be one, theeasiest to track and the easiest
to document and make a goodsolid case for, we always come
back to substantiation,especially in these kinds of
things. Remember, we're taking aposition that by definition is
(14:21):
not generally the rule. Right?The the general rule is passive
losses can offset active income.Now there's always the exception
to the rule.
The exception to the rule is ifyou materially participate in
that passive activity, you mightbe able to offset that active
income. So if there's ever aquestion, right, the default
position is, no, you can't dothat unless you've done these
(14:45):
things. You've met one of thesematerial participation tests. So
we always wanna try to documentthat as much as possible just in
case there's ever a questionabout that.
Chris Picciurro, CPA (14:53):
It's yeah. If you and if you're listening
to this and watching it, thinkabout this. Think about these
losses being like a like ahandicap parking spot. By
default, you can't just pullyour car into the handicap spot.
It's there for people thatactually need it, like my dad.
That's why I like kinda liketraveling with my dad. Save some
stuff. But but but it's therefor people that need it
(15:15):
legitimately. So if you'reillegitimately parking in it,
there's the the penalties aresignificant. Your car is gonna
get towed.
There's not a 100% chance you'regonna get caught, so we never
advocate doing anythingunethical. But, but if you if
you meet one of the tests, I e,you either have a temporary
handicap permit or a permanenthandicap permit, slide your car
(15:36):
in there and go about yourbusiness. And that's that's kind
of the way I think about thatsituation.
Jeremy Wells, EA, CPA: Absolutely. Absolutely. I think (15:42):
undefined
that's a great analogy. Youknow, it's something that every
now and then, and we hate to dothat, you know, we're not
looking to enforce, you know, asyour as your tax professional,
as your tax adviser, your taxreturn preparer, we're not
looking to enforce the rules.We're looking to help you make
sure that you're following therules as much as possible.
(16:03):
And so when we, you know, askyou for information or when we
downright insist on information,we're doing that, yes, there is
part of that to protectourselves because we can't
prepare a return in a way thatcould be considered incorrect,
and then therefore that's goingto cause problems for us as the
(16:24):
preparer. If we have, you know,signed our name on that return
as the preparer of that return
Chris Picciurro, CPA (16:28):
Mhmm.
Jeremy Wells, EA, CPA (16:28):
There's a potential for us to have, you
know, some problems with the IRSwith that return if we put
something on there that isn'ttrue. But you as our client, you
know, we're looking out for yourbest interest. We don't want you
to wind up in a fight with theIRS and you don't have the
information and especially thedocumentation to support the
(16:50):
position that we took on thatreturn for you.
Chris Picciurro, CPA (16:53):
Correct. I I saw a return this person has
real estate professional status,rep status, but they invested in
a limited part or they investedas a limited partner in an
apartment syndication. Theydon't have material
participation, and they own 3%.And the previous preparer let
them take that entire loss.Loss.
(17:14):
And it's like you know? So sothat that's that's a that's a
problem. Of those things.
Jeremy Wells, EA, CPA (17:19):
That's a problem.
Chris Picciurro, CPA (17:20):
The problem. So as the so you just
inform them and and, you know,say you you should amend this
return. But so my my point isand this is where I think and I
I don't I'd like to know aboutyour experiences. I feel like
and we're pretty heavy in realestate on our private practice.
Real estate professional statusdoesn't just give you a green
light to write off any type ofreal estate investments.
You still need to meet one ofthese, material participation
(17:43):
tests and have some type ofownership too. Like, in in the
hours, you know, this isn'tnecessarily an hours discussion,
but but in you know, sometimessomeone will say, well, I work
at a I work as at a real estatebrokerage. I'm the office
manager, so I have seven hundredand fifty hours in real estate.
You might, but you don't own anyof that brokerage. So there's
(18:03):
there there are rules.
Jeremy Wells, EA, CPA (18:05):
Yep. Yep. And and that's that's always a
fun thing to because I live inNortheast Florida. And, you
know, the first few years whenwe moved here, I was reaching
out, finding a lot of clientslocally. And Northeast Florida
real estate market has beenrelatively hot, you know, and
(18:25):
growing for a At one pointduring the pandemic, I saw a
statistic somewhere that therewere at one point more real
licensed real estate agents thanthere were homes for sale on the
market.
Like, it's, you know Right. I Ithink that shifted, you know,
(18:45):
over the last year or two. Butit's it's it's a lot here.
Chris Picciurro, CPA (18:50):
And
Jeremy Wells, EA, CPA (18:50):
I've gotten a lot of clients and a
lot of questions about whatexactly is that concept of real
estate professional. I've got areal estate license. Does that
mean I'm a real estateprofessional? I own x number of
properties. Am I a real estateYou know, like, your example, I
work in a brokerage.
Does that make me and it's oneof those things where the the
(19:14):
way we just in common languagewould use a term may not be the
way tax law specifically definesthat term. And this is one of
those cases. Right? Just becauseyou have a real estate license
doesn't make you a real estateprofessional for tax purposes
necessarily. There's more thatyou've gotta be able to show
(19:36):
there.
So it's really important tounderstand what those rules are
and, you know, ideally, for me,work with a tax adviser who
knows those rules and can adviseyou on them.
Chris Picciurro, CPA (19:47):
Right. And we did I think we're gonna redo
a little content because we youknow, being a realtor doesn't
make you a rep status.
Jeremy Wells, EA, CPA (19:54):
Yeah. Exactly.
Chris Picciurro, CPA (19:55):
But you could be rep status without
being a realtor.
Jeremy Wells, EA, CPA: Absolutely. (19:57):
undefined
Chris Picciurro, CPA (19:58):
So you there are different kinds of now
your activity as a realtor,depending on what activity you
are what activities you'reparticipating in, especially if
you're a broker or maybe youthose hours could count. It's
just a matter of it's just youknow, it's it's tough. And
Jeremy Wells, EA, CPA (20:13):
And I and I've had situations where I've
had clients that they they wentand got a real estate license.
They spent a lot of time, andand even a lot of time that
would qualify as materialparticipation into their real
estate activities. They startedputting together a portfolio.
The whole time, they kept theirw two job though. And that's
(20:36):
always a problem, right, for forpeople looking to be considered
for tax purposes a real estateprofessional, because it makes
it really, really difficult, ifnot virtually impossible, to
make the claim that you spent atleast half of your working time
in her real estate profession.
Right? And so you've got a w twowith six figures coming out of,
(20:59):
you know, the investment firmthat you work for or for the,
you know, tech startup that youwork for or whatever it is, you
know, that that that can be adeal breaker, and it usually is.
So it's really important tounderstand all the rules and not
just assume based on what thelabel is that you've met those
qualifications.
Chris Picciurro, CPA (21:19):
Well, when we develop which I've been
telling John kinda tongue incheek, when we develop the
teaching tax flow dating app,there's gonna be swiping going
on. Hey. I'm a rep status. Okay.I wanna I wanna find that sugar
daddy or sugar mama w two or,oh, you have got some activity
losses?
I'm about to exit my business.Let's get together.
John Tripolsky (21:36):
I could see it now. Like, you're there's the
the toolbar. Right? You'reyou're squeezing it out one end
or the other on how much youneed. Right?
That's the real match. And thenthe photo comes afterwards.
Right?
Jeremy Wells, EA, CPA (21:46):
So Absolutely.
Chris Picciurro, CPA (21:47):
As far could you give us a couple tips
as we if it's kinda wrap up onthe practical side of of of
maybe tracking hours, how itworks when you have two spouses.
Maybe can those hours be becombined at all? And just some
practical, again, practicaltips. And we've we've got a a
(22:08):
shameless plug by one of thepodcast sponsors is Reps
Tracker, which is an app I'veused that that helps you track
all this, but you still got youknow, you don't have to use an
app. You could have
Jeremy Wells, EA, CPA (22:18):
a spreadsheet if it's documented
properly. So what what are someof the hacks that you can give
us? Yeah. A 100%. And thatthat's always what I recommend
whether, you know, you'retalking about tracking your
material participation in yourrental portfolio, whether you're
talking about tracking yourincome and expenses for your
(22:39):
business, whether you're talkingabout tracking your mileage.
Right? There's an app for that.Right? That's that saying that's
been around for, you know, what?When they introduced the iPhone,
you know, eighteen years agonow.
You know, we've been we've beensaying there's an app for that.
And there is, and you know, wewe're always going to push for
that because it simplifiesthings. But in the meantime,
(23:00):
just start off with spreadsheet.Right? And when you get sick and
tired of doing it in thatspreadsheet because you feel
like you're constantly in thatspreadsheet logging this stuff,
that's that's when it's time tolook at the app.
Right? Until then, use thespreadsheet because not only
does that save you the cost ofhaving to subscribe to another
app. Right? But it also forcesyou to sit there and think
(23:23):
about, okay, what am I actuallydocumenting here? What is
actually important?
What do I actually need to betracking? And as you manually
enter, you know, each one ofthose rows into that
spreadsheet, you see that buildup over time. And I think
there's a psychological effectthere. But, yeah, absolutely. So
you you need to keep thatcontemporaneous log.
(23:44):
And for those of you who hadbeen small business owners and
you've, you know, worked in abusiness where you had to drive
around, you should have heardthat phrase from tracking your
mileage, which you need to bedoing with your real estate
portfolio also. If you'redriving to go check on your
properties, if you're driving togo make repairs or mow the lawn
or whatever you're doing forthose properties, track the
(24:06):
mileage and then also track thetime. And I would make this two
separate tabs inside that samespreadsheet file, right? You
know, so that you keep it all inone place. But yeah, absolutely.
You need to track the the date,the amount of time, and you
know, what you actually didduring that time. And if you did
(24:26):
multiple things, if you repaireda doorknob, spent a half hour
doing that, and then you mowedthe lawn for an hour, and then
you did some other stuff, Youknow, track each one of those
individually. Yeah. Because, youknow, in your mind, this is all
just working for your realestate portfolio. But there are
rules.
There are certain activitiesthat qualify, and then other
activities that don't qualify.And if you're not a 100% clear
(24:48):
on what qualifies and whatdoesn't, one, ask your tax
adviser. But then in themeantime, just itemize all of
that out and make it a loteasier on yourself during tax
time. But yeah, definitelyrecommend tracking all that, and
you need to be doing itcontemporaneous. Don't wait
until tax time.
Don't wait until, you know, sixmonths or a year later, and then
try to just remember, you know,all those little fifteen,
(25:11):
thirty, sixty minute tasks thatyou completed at your rentals.
Do that at least on a dailybasis, if you're if you're doing
that kind of work at yourrentals.
Chris Picciurro, CPA (25:20):
Well, I appreciate it. I would say, you
know, as we wrap it up, materialparticipation is required to to
take in any type of activity, asyou've said, from non from non
or from passive to nonpassive.
Jeremy Wells, EA, CPA: Absolutely. (25:36):
undefined
Chris Picciurro, CPA (25:36):
Track things. If you tell your tax
professional you hadmiraculously exactly 15,000
miles on your vehicle, theymight not eye roll you out. But
inside, they are, and and that'sokay. We we just do it. You put
out so much great content, notjust professionals, for
entrepreneurs.
Can you let, as we wrap up, leteveryone know how they can find
(25:58):
you? And, obviously, we're gonnaput it in the show notes.
Jeremy Wells, EA, CPA (26:00):
Well, thank you very much. I
appreciate that. So I I write alot of my content is geared
toward other tax professionals,but I do try to make it at least
somewhat accessible to non taxpros if you're kinda on the
nerdy side or you know, if youjust wanna listen to where maybe
your tax pros getting theirideas or information from. But
(26:20):
right now it's, it's mostly twodifferent things. One is a sub
stack that I occasionally sendout, I need to send out more.
But that's jaywells. Tax. Andthen I have the podcast which we
have a new episode, they'reusually around fifty to fifty
five minutes, that's the minimumfor one hour of CE for tax
professionals continuingeducation. That comes out every
(26:42):
other Wednesday. Each episode isis one specific tax topic that I
do a little bit of a fiftyminute deep dive on, go through
the law, but also look at somecase studies, try to make that
make sense to to whoever'slistening to it.
John Tripolsky (26:57):
Awesome. Yeah. We'll definitely we'll drop in
the show notes, as Chrismentioned as well too. And and
Jeremy, my big takeaway fromthis, right, and I'll leave it
kind of at that one is westarted this off talking about
education. Right?
And as a tax pro, I'm gonna makethe assumption that you actually
never stop educating yourclients. Is is that a is that a
correct assumption?
Jeremy Wells, EA, CPA (27:16):
My one of the favorite parts of working in
academia was not lecturing, notresearching and writing,
although I enjoyed all thatwork. It was the office hours.
It was the one on oneconversations with students when
they would come. And a lot oftimes those conversations
wouldn't be anything about theactual coursework we were doing.
It would be about what are theircareer goals?
(27:38):
What are their life goals? Whatare they going through in life
right now that made it to wherethey couldn't get their essay in
on time? Right? Those sorts ofthings. And that's when I got to
transition from being aprofessor to an actual counselor
and in some cases coach.
And I've always tried to captureand keep a little bit of that in
the accounting work that I do.And I've gotten to a point now
to where I feel just confidentenough to not only do that with
(28:02):
clients, but also do that withother tax tax professionals who
are trying to get their start inthis profession as well. So
yeah, absolutely. Definitelydefinitely education is still a
key part of the the work thatI'm trying to do. It's mostly
client work, but trying tofactor in a little bit more of
that kind of work too.
John Tripolsky (28:18):
Awesome. Well, it keeps you sharp. And and,
Chris, good call having Jeremyon with us to talk about this
topic. And, yeah, man, we'll,we'll have you back. So we'll
we'll ping you at some point andharass you to come back on the
show with us.
Jeremy Wells, EA, CPA (28:29):
I appreciate it. I'll be looking
forward to it.
John Tripolsky (28:31):
Show notes, links in there. Click on them,
follow them, and we'll see youback here again next week on the
teaching tax law podcast. Have agreat week, everybody.
Disclaimer (28:40):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(29:02):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained the memorandum.
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