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.
