Real estate activities under section 469 | KPMG | GLOBAL

IRS nonacquiescence: Material participation in real estate activities, section 469

Real estate activities under section 469

Action on Decision (AOD) 2017-07—appearing in the Internal Revenue Bulletin 2017-42 (dated October 16, 2017)—states that the IRS Commissioner does not acquiesce to a 2015 decision of a federal district court that addressed issues under the passive activity rules of section 469.

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In Stanley v. United States, No. 5:14-CV-05236 (W.D. Ark. 2015), the federal district court granted summary judgment for the taxpayers in their tax refund suit. At issue were questions about the taxpayer/husband's material participation in real estate activities, and whether all work engaged in by him for the benefit of a property-management company would be counted toward determining whether he materially participated in his rental real estate activity. 

AOD 2017-07 appears in IRB 2017-42 [PDF 211 KB] and explains that the nonacquiescence relates to the holdings that: 

  • Mere possession of a stock certificate—disregarding other conditions, restrictions or limitations on the possessor’s rights regarding the stock—constitutes ownership for purposes of section 469(c)(7)(D)(ii)
  • Work performed by the taxpayer in a rental real estate activity for purposes of section 469(c)(7)(A) may also constitute work performed by the taxpayer in non-rental business activities of the taxpayer for other purposes of section 469

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