The Tax Court recently ruled on the same day in favor of the IRS in two unrelated cases involving the passive loss rules for rental activities (see also "Real Tax Savings in Real Estate," page 68). In one case, the court determined that a taxpayer's rental activity was passive, since the taxpayer was unable to demonstrate that the activity qualified as a real property trade or business under the exception of [section] 469(c)(7). In the other case, the court determined that a taxpayer's rental activity was not passive, under the "self-rental" rule of Treas. Reg. [section] 1.469-2(f)(6).
A taxpayer's passive losses can be deducted only to the extent of passive income. Under ...