As the end of the tax year approaches, Julie, a successful full-time real estate developer,...
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Accounting
As the end of the tax year approaches, Julie, a successful full-time real estate developer, and investor, recognizes that her income tax situation for the year could be bleak. Unless she and her spouse, Ralph, are able to generate more hours of participation in one of her real estate rental activities, they will not reach the material participation threshold. Consequently, the tax losses from the venture will not be deductible. To ensure deductibility, Julie suggests the following plan: She will document the time she spends "thinking" about her rental activities. During the week, Ralph will visit the apartment building to oversee (in a management role) the operations of the rentals. On weekends, she and Ralph will visit the same units to further evaluate the operations. Also on the weekends, while they are doing their routine household shopping, they will be on the lookout for other rental properties to buy. Julie plans to count both her and Ralph's weekend hours toward the tally of total participation. Julie contends that the law clearly allows the efforts of one's spouse to count for purposes of the material participation tests. Likewise, nothing in the tax law requires taxpayers to be efficient in their hours of participation. How do you react

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