Real Estate Professionals
Contemporaneous Log and Travel Time
On April 13, 2015, the Tax Court ruled in Richard Leyh v. Comm (TC Summary Opinion 2015-27) that taxpayers who elected to aggregate their rental real estate activities and who kept a detailed contemporaneous log of the time spent operating their 12 rental properties were real estate professionals (REPs) who could deduct $69,531 of losses against their non-passive income such as wages.
Key elements of this case follow:
- The court allowed the taxpayer's wife to include the travel time in driving from their principal residence to the rental properties to perform services.
- Although a Tax Court Summary Opinion cannot be cited as precedent, it is comforting to see pro se taxpayers (taxpayers who represent themselves) beat the IRS with a detailed contemporaneous log and travel time.
- The election to aggregate the properties also was critical to the taxpayers' victory.
If you are a tax professional who represent taxpayers who purport to be real estate professionals, you may want to advise them to make an election to aggregate (if they have not already done so), keep a detailed contemporaneous log of the time spent servicing the rental properties, and remember to include travel time in their original log.