The Tax Court in Brief October 24 – October 30, 2020

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The Tax Court in Brief October 24 – October 30, 2020

Freeman Law’s “The 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 October 24 – October 30, 2020

Sharma v. Comm’r, T.C. Memo. 2020-147 

October 29, 2020 | Gale, J. | Dkt. No. 19466-17

Short SummaryThe taxpayers field a joint federal income tax return for their 2014 tax year.  On their return, they claimed a loss of $26,877 from rental real estate activities detailed on Schedule E.  The IRS disallowed $20,913 of their claimed $26,877 Schedule E loss deduction, resulting in a deficiency in tax of $5,230.  The taxpayers filed a timely petition with the Tax Court.

Key Issue:  What portion of the taxpayers’ loss deduction from rental real estate activities claimed on Schedule E is disallowed under I.R.C. § 469(a) and limitations on the deductibility of passive activity losses.

Primary Holdings

Key Points of Law:

InsightThe Sharma decision serves as a good reminder as to how complex the passive activity loss rules can be under section 469 of the Code.  Taxpayers should consult with a tax professional where they are engaged in real estate activities.

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