Although this is public record, I’m referring to the taxpayer in the case as TP. He seems to have a pretty low internet profile and I’m not going to be the one to raise it. There is an exception to the per se passive rule for people engaged in real estate trades or businesses. There are some technical points and elections to consider, but someone who mostly busies himself working in real estate business that he owns can avoid the per se passive rule.

Key Takeaways:

• Code Section 469, the passive activity loss rules, requires us to divide our business activities into passive and non-passive buckets.
• There is an exception to the per se passive rule for people in real estate. However, you have to spend more time on your real estate business than you do on anything else.
• Real estate pros with full time day jobs are held to almost insurmountable substantiation standards. You need contemporaneous logs that ideally correlate with things like invoices and phone records.

“Remember your real estate time has to beat you day job time, so taking time away from the day job to work on real estate could do double duty.”

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