Darin T Jensen's Legal Cases (2)

Tax

IRS Audit - Passive Losses

Jul 13, 2009

OUTCOME: Client prevailed

IRS challenged my client's deduction of passive rental losses from 8 rental properties against ordinary income stating that one person could not materially participate in each year on each of the renta ... l properties (spend 500 hours per year on each property). I successfully proved that the client met the 500 hours on a couple of the properties and also met other material participation tests for the other properties, thus allowing the losses to be properly deducted.

Tax

IRS Audit - Hobby Loss and Material Participation (2)

N/A

OUTCOME: Client prevailed

IRS challenged the losses taken on two of my client's tax returns (different clients) in success years and disallowed the losses as hobby losses. The activity was horse racing, which is a real red fla ... g for the IRS. Through a series of careful interviews, site visits, and the creation of a spreadsheet detailing daily, weekly, monthly, and annual time spent on the activity we were able to show that the activity not only wasn't a hobby but that the client materially participated in the activity and the losses were allowed to be deducted against ordinary income. This was the result of both cases.

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