Abstract
Abstract: “Real estate professionals” get to fully deduct losses associated with real estate activities. Under I.R.C. §469(c)(7), a real estate professional spends most of their time conducting real estate trades or businesses as compared to non-real estate activities (the “50 percent” test), and puts in over 750 hours in real estate activities (the “750-hour” test). A real estate professional must also materially participate in real estate activities for the two tests to be satisfied – the activity has to be a real estate trade or business. In the past, IRS has taken the litigating position that the 750-hour test has to be satisfied on a per activity basis absent an election to aggregate all of the taxpayer’s rental activities. However, as detailed in this article, the Tax Court said that position was incorrect in a 2011 opinion and now the IRS has conceded the issue.