IRS Says Disabled Vet Should Have Worked Faster - Disallows Rental Losses.

The petitioner was a disable Vietnam War veteran, sustaining an overall disability of 60 percent, including 50 percent to his right arm and 30 percent to his feet.  The petitioner owned a rental property that adjoined his home and kept the property free of debris, made bank deposits, did some repairs personally, and handled tenant disputes, among other things.  The petitioner sustained losses for the years at issue on the rental property and deducted the losses.  The IRS severely limited the losses and maintained that the petitioner was not a real estate professional under I.R.C. Sec. 469(c)(7) because he failed to meet the 750-hour test.  While the petitioner did not have other work and, therefore, satisfied the 50 percent test, the IRS maintained that the only way the petitioner put in more than 750 hours into the rental activity was because he worked too slowly.  Had he worked faster, IRS maintained, he would not have put in the requisite 750 hours.  The court disagreed with the IRS and allowed the deductibility of the losses.  The court noted that the petitioner was disabled and, based on the record of the work that he performed and his physical condition, satisfied the 750-hour test.  Lewis v. Comr., T.C. Sum. Op. 2014-112. 

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