Posted by Eric in FL on June 04, 2011 at 13:10:13:
John,
I completely agree with you and I am very confident they are wrong. My
accountant’s fear is that we go to court and the IRS holds up their
decision. As with anything it’s time to get several opinions and devise a
plan. This whole episode has really shown me how inept the IRS is on
every level. What’s sad is I have the resources and knowledge to take
them on which is very different then the majority of taxpayers. It’s sad.
Thanks!
Real Estate Professional Denied - Posted by Eric in FL
Posted by Eric in FL on June 01, 2011 at 09:51:25:
I wanted to see if anyone else has had this occur. I am a W2 employee and my
wife is a real estate professional. We were audited and the IRS denied her
status. We have hourly record keeping and meticulous records. My accountant
fought the outcome and we went to appeals where they ultimately found
against us. We are now scheduled for tax court and I am trying to find
alternatives to this. I have contacted a tax attorney and he claims it could be
up to $50,000 to litigate and we should just settle. I want to settle as well but
the agent is steadfast against this. It seems like the real estate professional
status may be under attack.
Has anyone else dealt with this before? I am trying to gain my own knowledge
through others who have dealt with this before. I trust my accountant and
lawyer but you can only have so much information that may not pertain to
you. Thanks for any input!
Re: Real Estate Professional Denied - Posted by John Hyre
Posted by John Hyre on July 20, 2011 at 09:32:46:
IRS is ALL OVER Real Estate Professional status, high rate of audits, and frankly, high rate of victories. Backing it up does require serious, detailed, credible records, which REI just hate to spend the time on. IRS usually wins these cases, but not always. It’s really a judgment call as to “how good are your records”. Also need a credible story. For example, if you have 4 SF houses and claim to spend 750 hours/year (or 4 hours per week per house), that’s a real tough sell, even if the records are good. Think about it…4 hours per week, per unit. IRS would laugh and say “What, are you making dinner for the tenants every night? We’d likd to rent from you!”
We do this sort of litigation, Tax Court only, not in District Court. Such cases are fairly simple and generally run $3,000 - $5,000 for smaller REI, assuming case is scheduled in Columbus, OH, (no travel for us) which we have done for REI all over the country. A large number of these cases settle once IRS lawyers see them, avoiding the trial altogether and keeping cost on lower end of what I described.
Have you filed in Tax Court yet? Has your “90 Day” deadline to file (would be stamped on your assessment letter) passed yet?
John Hyre
Re: Real Estate Professional Denied - Posted by JOHN HASLACH
Posted by JOHN HASLACH on July 05, 2011 at 12:31:50:
You’re detailing with passive losses and the 469 real estate professional rules? 750 hours, > that 1/2 your time, cannot use time working in real estate is you are not a 5% owner?
Re: Real Estate Professional Denied - Posted by Todd
Posted by Todd on June 08, 2011 at 09:12:39:
The litmus test the IRS uses in this instance is really whether your wife is a full-time realtor (i.e. has a place of employment at an actual brokerage such as ReMax, Century21, etc and actively sells RE). If she’s just an investor with her RE license that would explain why they are questioning it.
IRS can be wrong - Posted by John Merchant
Posted by John Merchant on June 01, 2011 at 13:43:49:
As court decisions around the country have amply demonstrated the
IRS can be & often is beaten on its dumber decisions.
Idea for you: Advertise for and hire a freshly minted just-licensed
lawyer and agree to pay him/her a reasonable hourly fee and you pay
all expenses and then you & your lawyer go to work and see if you
can beat them.
Re: Real Estate Professional Denied - Posted by Mike De Luca
Posted by Mike De Luca on September 12, 2011 at 19:47:46:
Hellop John I would like to discuss this I am under an audit no i know all the rules I Know I qualify but the auditor keeps denying me
Have taken the election. meet the 750 service hours, meet the 500 material,participation hours,even continually manage the property for the past 5 years
meet more the 2 of the seven test
Evem have documentation of how many hours i have on my other job which less than my real estate
My Home number is 631 744 7266 in New New York