SECTION 4. RESIDENTIAL LIVING

FACILITY SAFE HARBOR

.01 Safe harbor for certain residential living facility trades or businesses . A taxpayer engaged in a trade or business that manages or operates a qualified residential living facility, as defined in section 3.01 of this revenue procedure, may treat such trade or business as a real property trade or business solely for purposes of the election to be an electing real property trade or business under sections 163(j)(7)(B) and 168(g)(1)(F) of the Code. Satisfying the requirements of the safe harbor is not a determination that the taxpayer is engaged in a real property trade or business under section 469 of the Code.

.02 Effect of election and how to make the election . If a taxpayer makes the election pursuant to this safe harbor, the provisions in § 1.163(j)-9 of the regulations apply, and the taxpayer must use the alternative depreciation system of section 168(g) of the Code to depreciate the property described in section 168(g) (8). The taxpayer makes the election at the time, and in the manner prescribed by § 1.163(j)-9(d). See also Rev. Proc. 202022. .03 Substantiation . A trade or business that manages or operates a residential living facility to which this revenue procedure applies must retain books and records to substantiate that all the requirements of this section 4 have been met in accordance with section 6001 of the Code.

September 28, 2020 784 Bulletin No. 2020–40

.04 Anti-abuse . Arrangements entered into with a principal purpose of avoiding the rules of section 163(j) of the Code or the regulations under section 163(j) may be disregarded or recharacterized by the Commissioner of Internal Revenue to the extent necessary to carry out the purposes of section 163(j). See § 1.163(j)-2(j).