With the deadline for filing personal income tax returns nearly upon us, a recent district court case from California offers a timely reminder that recordkeeping is important in reducing tax liability.
The case, Gragg v. United States, 2014 U.S. Dist. LEXIS 44862 (N.D. Cal. Mar. 31, 2014), involved a married couple whose rental real estate activities ran afoul of the passive activity loss limitations in Section 469 of the Code, which bar the use of losses from passive activity to offset other income. The Graggs had two rental properties, which had generated losses; after an audit, the IRS determined that the rental properties were subject to the passive activity rules and assessed the Graggs with two deficiency assessments of $14,874 and $43,499.… Read More