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Posts tagged Section 469(c)(7).

Congress most likely believed it was doing real estate professionals and their advisors a favor when it enacted Section 469(c)(7). That section excepts real estate professionals from limits on losses (and tax credits) generated on real estate rental activity. Those limits generally apply to passive activities. Under passive activity rules, taxpayers can deduct net passive activity losses only in certain cases. One of those cases applies when a taxpayer materially participates in an activity. This material participation case generally does not apply to losses generated from rental activities, though. Rental activity is per se “passive” under passive activity rules of Section 469. In other words, generally, no matter how much time a taxpayer spends on a real estate rental activity, all losses from that activity will be passive losses.

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