Bonds v. Comr., T.C. Summ. Op. 2011-122

(petitioner earned six-figure income as vice principal of high school in MN, but owned single-family house in K.C. near K.C. airport; house rented to tenants in 2004 and 2005; house has appreciated in value but is unfurnished; petitioner would post signs that house available to rent; claimed expenses on home for 2006 and 2007 exceeded income from home which IRS disallowed because home not held for production of income and losses were from passive activity; court held that house held for production of income and thus all ordinary and necessary expenses paid or incurred during tax year are deductible under I.R.C. Sec. 212; active participation test of I.R.C. Sec. 469(i) satisfied which allows petitioner to deduct up to $25,000 of rental real estate losses (subject to phase-out starting at AGI of $100,000; deductions allowed for substantiated expenses; court estimated some unsubstantial expenses under Cohan rule; deductions allowed totaled 413,000; 20 percent accuracy-related penalty imposed). 

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

RSS​ Facebook Twitter