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Note to real estate pros: Keep careful records

Proof needed to qualify for unlimited rental property tax loss deductions

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Andrew M. D'Avanzo and his wife, Linda, own five rental properties. On their income-tax returns, Andrew and Linda claimed (1) material participation in managing their rental properties and (2) $32,258 rental property tax losses as a "real estate professional." But the IRS denied the rental property losses. Andrew and Linda paid the disputed $9,129 tax and then sued for a tax refund in the U.S. Court of Federal Claims. Purchase Bob Bruss reports online. Andrew was a full-time computer salesman, but he "guesstimated" for the court the amount of time he spent managing and repairing the rental properties. Linda is a full-time school teacher. To qualify for the unlimited rental property tax loss deductions as a "real estate professional," Andrew or Linda must prove they spent more than 50 percent of their working time on their rental properties, and at least 750 hours of time during the year in real estate activities. If you were the federal court of claims judge would you rule Andrew or Li...