In a recent Tax Court decision, the court held that Ellen P. O’Neill’s time incurred while travelling to her rental properties to perform various tasks could be used as a way to prove her 750-hour threshold to qualify as a real estate professional. The ruling in this case contradict Truskowsky, a prior Tax Court case in which the court refused to count travel time because it represents commuting that “is an inherently personal activity and as such does not constitute ‘work’ in connection with a trade or business.” The Court noted that the taxpayer was aware of the record-keeping requirements to establish real estate professional status and found she provided detailed, accurate, day-to-day explanations of the specific activities in which she engaged. Based on this […]
Real estate activities are normally considered passive activities subject to passive loss limitations, unless a taxpayer qualifies for the real estate professional exception. To meet this exception, 1) more than one-half of the taxpayer’s personal services must be in real-property activities in which the taxpayer materially participates, and 2) these real-property personal services must be more than 750 hours.
The IRS has taken the hard stance that trusts cannot qualify for this exception, because “personal services” are defined to be “work performed by an individual in connection with a trade or business (Treas. Reg. § 1.469-9(b)(4)). Since trusts are not individuals, the IRS argues, trusts cannot perform personal services.
In Frank Aragona Trust, the Tax Court disagreed with the IRS’ position. The court noted […]