Tax Court rules for taxpayer in self-rental rule case

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Abstract: Those who rent property to their own business risk catching the eye of the IRS. But this article discusses one case in which the Tax Court found that the self-rental rule didn’t apply and the IRS shouldn’t have recharacterized the rental income as nonpassive in the first place. With the introduction of the new 3.8% tax on net investment income — which applies to certain passive income — it’s more critical than ever for taxpayers to properly identify their passive activities. Francis Dirico, 139 T.C. No. 16 (Tax Ct. 2012).