The Tax Court in Brief September 28 – October 2, 2020

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The Tax Court in Brief September 28th – October 2nd, 2020

Freeman Law’sThe Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

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The Week of September 28th, 2020 through October 2nd, 2020

Lucero v. Comm’r, T.C. Memo. 2020-136

September 29, 2020 | Pugh, J. | Dkt. No. 588-18

Short SummaryThe taxpayers owned short-term rental property in California.  The taxpayers rented the property to tenants in 2014 and 2015.  They paid a property management company to manage the property’s day-to-day rental operations, including advertising, cleaning, landscaping, and responding to tenant complaints.  However, the taxpayer maintained control over the setting of rental rates and approving expenses over $100.  The taxpayers reported losses from the rental property, and the IRS denied the losses.

Tax Court Case Key Issue:

Whether any of the taxpayers’ real estate losses reported on their Schedule E, Supplemental Income and Loss, are limited by Section 280A or Section 469 for the years at issue.

Primary Holdings

Key Points of Law:

InsightAs the Lucero decision shows, the Section 469 passive activity loss rules continue to be a trap for taxpayers who rent properties during any given tax year.  Accordingly, taxpayers with rental activities and losses are wise to consult tax advisors regarding whether they may deduct their losses under Section 469.


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