Question

You have just met with Scott Myers (603 Pittsfield Drive, Champaign, IL 61821), a successful full-time real estate developer and investor. During your meeting, you discussed his tax situation because you are starting to prepare his current Federal income tax return. During your meeting, Scott mentioned that he and his wife, Susan, went to great lengths to maximize their participation in an apartment complex that they own and manage. In particular, Scott included the following activities in the 540 hours of participation for the current year:
• Time spent thinking about the rentals.
• Time spent by Susan on weekdays visiting the apartment complex to oversee operations of the buildings (i.e., in a management role).
• Time spent by both Scott and Susan on weekends visiting the apartment complex to assess operations. Scott and Susan always visited the complex together on weekends, and both counted their hours (i.e., one hour at the complex was two hours of participation).
• Time spent on weekends driving around the community looking for other potential rental properties to purchase. Again, both Scott's hours and Susan's hours were counted, even when they drove together.
After reviewing Scott's records, you note that the apartment complex generated a significant loss this year. Prepare a letter to Scott describing your position on the deductibility of the loss.


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  • CreatedMay 25, 2015
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