Recent Tax Court Case Takes on Section 469 Passive Activity Loss Limitations

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Matthew L. Roberts

Matthew L. Roberts



Mr. Roberts is a Principal of the firm. He devotes a substantial portion of his legal practice to helping his clients successfully navigate and resolve their federal tax disputes, either administratively, or, if necessary, through litigation. As a trusted advisor he has provided legal advice and counsel to hundreds of clients, including individuals and entrepreneurs, non-profits, trusts and estates, partnerships, and corporations.

Having served nearly three years as an attorney-advisor to the Chief Judge of the United States Tax Court in Washington, D.C., Mr. Roberts leverages his unique insight into government processes to offer his clients creative, innovative, and cost-effective solutions to their tax problems. In private practice, he has successfully represented clients in all phases of a federal tax dispute, including IRS audits, appeals, litigation, and collection matters. He also has significant experience representing clients in employment tax audits, voluntary disclosures, FBAR penalties and litigation, trust fund penalties, penalty abatement and waiver requests, and criminal tax matters.

Often times, Mr. Roberts has been engaged to utilize his extensive knowledge of tax controversy matters to assist clients in their transactional matters. For example, he has provided tax advice to businesses on complex tax matters related to domestic and international transactions, formations, acquisitions, dispositions, mergers, spin-offs, liquidations, and partnership divisions.

In addition to federal tax disputes, Mr. Roberts has represented clients in matters relating to white-collar crimes, estate and probate disputes, fiduciary disputes, complex contractual and settlement disputes, business disparagement and defamation claims, and other complex civil litigation matters.

Recent Tax Court Case Takes on Section 469 Passive Activity Loss Limitations

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.

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.


For more coverage of U.S. Tax Court cases, see our weekly post, The Tax Court in Brief.

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