Why I think the Tax Court judge got the passive loss 750-hour test wrong

August 28th, 2010 by Joe Kristan

Last week I questioned whether a Tax Court judge was correct when he commented that absent an election to combine rental real estate activities under Sec. 469(c)(7), each real estate activity has to meet the “750 hour test” to make a taxpayer a “real estate professional.” This often would make a taxpayer’s status as passive or non-passive hinge on a procedural foot-fault — the filing of the Sec. 469(c)(7) election.
If a taxpayer becomes such a “qualified taxpayer,” then rental real-estate losses can be non-passive, and therefore deductible even absent offsetting “passive” income.
An alert reader poses this question to me:

Re the 750 hour test, Reg.

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