It just goes to show you that there are competent and incompetent people everywhere regardless of designation. I should be able to get the accuracy related penalties thrown out as I have copies of the misinformation provided by the blowhard practitioner. Nevertheless my friends have no basis to defend themselves for tax years 2010, 20 and will have to file amended tax returns for 2013 for both the IRS and the Colorado Department of Revenue and pay a whole bunch in interest and penalties because they trusted this jerk.
Passive activity audit guide license#
Doubtless to say his license will be reprimanded. I won’t be surprised to further learn that he probably failed to carry errors and omissions insurance as well. Guess what else? This tax attorney still asserts he is correct and refused to turn over the file in a timely fashion. Unfortunately the bag of wind that screwed up the tax returns (hailed from a ‘prestigious’ local law school) failed to fully comprehend where it specifically states that when spouses jointly own a business where one spouse materially participates and the other does not, both are treated as non-passive meaning the gains in the S-corporation cannot offset other passive losses generated by rental real estate which by default is customarily treated as passive activity. In fact they were incorrectly advised in writing that they could offset all of the rental loss incurred from the real estate holdings against the husband’s purported passive income from the S corporation by a POMPOUS ARROGANT MORON WITH A LAW DEGREE, the worst type of pond scum on the planet. This is a summary of the reality of the situation that my friends faced when the IRS conducted an examinationīecause the husband does not materially participate in the “wife’s business” his income from her company was incorrectly considered passive by the over priced tax attorney that prepared, signed and filed their 2010, 20 tax returns. Neither spouse is a ‘real estate professional’ for income tax purposes so those exceptions do not apply. It generated net income allocated and passed through 50/50 to each shareholder.
It is essentially her business that he happens to co-own. The wife materially participates in the corporation and the husband does not. But if it got you reading all the better because you may want to know about my friends, a professionally successful and happily married couple who jointly own rental real estate that generated losses for tax years 2010, 2011, and 2012 and their subsequent misunderstanding of material participation as it pertains to passive activity loss limitations, outside the bedroom.īesides the rental real estate they also happen to own as 50/50 shareholders a corporation that successfully elected to be treated as an S corporation. One would imagine this is the script to a low budget B-rated film by the title, it is not. Defining Passive Activity Between Spouses – Beyond the Bedroom: What Is Material Participation? Ha!
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