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Tax Articles

Passive Activities and the Real Estate Professional – IRC 469(c)(7) and Reg. 1.469-9

A qualifying real estate professional may deduct rental real estate losses for each rental in which he/she materially participates provided 3 tests are passed: More than one half of the taxpayer’s personal services must be in real property business.  ‘Real property’ trade or business activity includes: development, construction, acquisition, conversion, rental, management, leasing, and brokerage. …


Passive Asset Disposition

There are two distinct issues to evaluate when disposing of a passive  asset: Is the disposition considered to be a qualifying disposition under reg 1.469 making the losses deductible? Is the gain on the sale truly passive income and entered on IRS form 8582 triggering deductibility of unrelated passive losses? Current and suspended losses are…


Adoption Tax Credits including Tax Credit Carry Forwards are now FULLY REFUNDABLE in tax year 2010 According to IRS Notice 2010-66

According to Marilyn E. Brookens, an attorney in the IRS Office of Associate Chief Counsel (Income Tax and Accounting), “Effective for the 2010 tax year, the adoption tax credit is a FULLY REFUNDABLE TAX CREDIT.  The credit was made refundable by Section 10909 of the Patient Protection and Affordable Care Act.  The refundable credit is…


What happens with suspended prior year losses when a now non-passive activity generates net income?

If the current year non-passive activity triggers deductibility of prior year suspended passive activity losses, IRC 469(f) permits a prior year passive loss to offset current year income from the same activity, even though that income might be non-passive in the current year. While net income or gain on sale is non-passive, it may be…


Tests for Material Participation IRC 469(h) Reg. 1.469-5T

Material participation is regular, consistent and substantial personal involvement in operations. It is required in businesses, farms, rental real estate owned by real estate professionals, most vacation rentals, hotels, motels, and B&B’s, etc.. Basically most anything reported on IRS form K-1 Line 1 for partnership or ‘S’ Corp businesses should evaluate material participation issues. For…


Stop messing around, take it to IRS Appeals

My mantra lately is becoming …. ‘take it to appeals. Stop messing around.’ The Appeals function offers an additional forum for taxpayers to resolve conflicts and mediate disputes with all operating divisions inside the IRS. The IRS Appeals function should be viewed as an asset to the tax payer. The IRS Appeals function is substantially…


Partial Payment IRS Installment Agreement PPIA

The PPIA is an installment agreement that pays back less than what is owed to the IRS because of the expiration of the statue of limitations for collection. It is requested by filing out  IRS form 433. The PPIA was formally authorized in the American Jobs Creation Act of 2004 which amended Internal Revenue Code…