U.S. Tax Court Memorandum Decision Upholds IRS’s Denial of Depreciation Deductions for Rental Properties

The U.S. Tax Court, in a memorandum decision, held that the taxpayers were not entitled to claim depreciation deductions for rental properties due to a lack of substantiation, partially affirming the IRS’s notice of deficiency. Taxpayers, a married couple, filed a joint return for 2015 that included Schedules C for a law practice and restaurant, and Schedule E for two rental properties. The IRS determined the taxpayers underreported gross receipts for the restaurant and failed to substantiate depreciation deductions claimed for the rental properties. The taxpayers petitioned the Tax Court, challenging the validity of the notice of deficiency and disputing ...