Key Takeaways
- Five critical errors and three audit triggers—awareness is the first layer of defense.
- REPS documentation must be contemporaneous, property-specific, and supported by the aggregation election.
- Records retention extends to life of ownership plus years after sale—digital storage with cloud backup is essential.
- Written tax opinions provide penalty defense and cost a fraction of the penalties they prevent.
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Test Your Knowledge
1.An investor fails to claim depreciation on a rental property for 5 years, then sells the property. What happens regarding depreciation recapture?
2.What is the IRS penalty rate for an underpayment caused by negligence or substantial understatement of income?
3.Which of the following is the strongest defense against IRS accuracy-related penalties?