I just returned from a very unsatisfactory visit with the IRS. The auditor examined my three rental properties, disallowed my losses, and told me to expect a tax bill for $55,000.
Current score: IRS $55,000 ahead.
One good thing happened, I think. The IRS agreed that my wife is a real estate professional.
The bad thing was that the IRS said my wife did not materially participate in the rentals, because the more than 750 hours shown in her logbook that count to make her a real estate professional include time that does not count as material participation, such as time spent
inspecting, analyzing, choosing, and acquiring property;
reviewing statements, reports, and publications;
doing computer analysis;
making visits ... Log in to view full article.