Case: Passive Activities Limitation Must Be Negated By Reliable Documentation for Deductibility (T.C. Memo) (IRC §469)

Failure to provide proper documentation on hours spent on short-term rental property causes a taxpayer’s deductions to be denied under the passive loss rules, the Tax Court held in a memorandum opinion. Taxpayers hired Property Management company to manage and upkeep a rental Property, but to save money, Taxpayers performed some of the upkeep themselves. Taxpayers reported, after rental income and expenses, net Property losses. The IRS issued notices of deficiency that disallowed any deduction for all the real estate losses. Property’s amount rented in price and time were undisputed; at issue was Taxpayers’ deductions that created a net loss. ...