- 10 - do not doubt that petitioner worked hard during the year in issue, but he simply failed to present convincing evidence about the amount of his work in his real property activities. We hold that petitioner was not a qualifying taxpayer in 2001 for purposes of section 469(c)(7), and therefore his rental real estate activity during 2001 is classified as passive activity. Although petitioners are not entitled to deduct the full amount of their passive rental real estate losses, section 469(i) allows a taxpayer to claim up to $25,000 per year in passive activity losses from rental real estate activities (the $25,000 exemption), subject to a phaseout once the taxpayer’s adjusted gross income exceeds $100,000. To qualify for the $25,000 exemption, the taxpayer must have “actively participated” in the rental real estate activity. The active participation requirement can be satisfied without regular, continuous, and substantial involvement in an activity. See Madler v. Commissioner, T.C. Memo. 1998-112; S. Rept. 99-313, 737-738 (1986), 1986-3 C.B. (Vol. 3) 1, 737-738. The active participation standard should be met as long as the taxpayer participates in a significant and bona fide sense in making management decisions or arranging for others to provide services such as repairs. Madler v. Commissioner, supra. The $25,000 exemption is phased out by 50 percent of the amount by which the adjusted gross income of the taxpayer for the taxable yearPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011