The Section 469(c)(7)(A) Aggregation Election
REPS-qualified taxpayers can elect under Section 469(c)(7)(A) to aggregate all rental real estate activities as a single activity for material participation purposes. The election simplifies the test: 750+ hours across the portfolio passes Test 1 easily. The trade-off is at disposition: suspended losses release only when substantially all aggregated activities are sold.
How the election works
Made on the return for the year it takes effect. Generally irrevocable except in cases of a material change in facts. Treats all of the taxpayer's interests in rental real estate as a single activity for purposes of applying the passive activity loss rules.
The election applies to material participation testing under Temp. Reg. 1.469-5T. Instead of testing each rental separately, the taxpayer tests the aggregate. 1,000+ hours across 10 rentals easily passes Test 1.
When to make the election
Taxpayers with multiple rental properties where individual properties would not independently pass material participation. The aggregation provides certainty by combining hours.
Taxpayers planning long-term hold of the entire portfolio. The election is irrevocable, so it should match the strategic hold plan.
The disposition trade-off
Section 469(g) releases suspended losses on a 'fully taxable disposition of the activity.' With aggregation, the activity is the aggregate. Suspended losses do not release until the taxpayer disposes of substantially all of the rental real estate.
Selling one property out of an aggregated portfolio does not trigger Section 469(g) release. The suspended losses continue to suspend until the broader disposition occurs.
Frequently asked questions
- How does WeCostSeg coordinate with my CPA?
- Every engagement follows the three-touch CPA Coordination Protocol. Preliminary analysis CC'd to your CPA on intake, draft report shared five business days before final delivery, and Form 3115 filing coordinated when a Section 481(a) adjustment applies.
- Does OBBBA's 100% bonus apply to my acquisition?
- 100% applies to property under a binding contract on or after January 20, 2025 per Public Law 119-21. Property under a binding contract on or before January 19, 2025 stays on the legacy phase-down: 40% in 2025, 20% in 2026, 0% in 2027 and after.
- Is audit defense included?
- Yes. Every WeCostSeg engagement includes five years of written audit defense at no extra charge, aligned to the 13 Principal Elements of a Quality Cost Segregation Study under IRS Publication 5653 Chapter 4.
- Can I get a free preliminary analysis?
- Yes. Submit property details via the free proposal form or WhatsApp. Engineer-reviewed estimate returned within four business hours during US Eastern hours.
Zawwad Ul Sami, Founder
Zawwad Ul Sami is the founder of WeCostSeg, a founder-led cost segregation firm serving real estate investors across the US. He focuses on strategy, pricing, and the firm's overall direction.