![]() In fact they were incorrectly advised in writing that they could offset all of the rental loss incurred from the real estate holdings against the husband’s purported passive income from the S corporation by a POMPOUS ARROGANT MORON WITH A LAW DEGREE, the worst type of pond scum on the planet. This is a summary of the reality of the situation that my friends faced when the IRS conducted an examinationīecause the husband does not materially participate in the “wife’s business” his income from her company was incorrectly considered passive by the over priced tax attorney that prepared, signed and filed their 2010, 20 tax returns. Neither spouse is a ‘real estate professional’ for income tax purposes so those exceptions do not apply. It generated net income allocated and passed through 50/50 to each shareholder. It is essentially her business that he happens to co-own. ![]() The wife materially participates in the corporation and the husband does not. But if it got you reading all the better because you may want to know about my friends, a professionally successful and happily married couple who jointly own rental real estate that generated losses for tax years 2010, 2011, and 2012 and their subsequent misunderstanding of material participation as it pertains to passive activity loss limitations, outside the bedroom.īesides the rental real estate they also happen to own as 50/50 shareholders a corporation that successfully elected to be treated as an S corporation. ![]() One would imagine this is the script to a low budget B-rated film by the title, it is not. Defining Passive Activity Between Spouses – Beyond the Bedroom: What Is Material Participation? Ha! ![]()
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