tax research tax research software from the founder of kleinrock
Parker Tax Pro Library
Professional Tax Research Parker Pro Library
Tax and Accounting
IRS Compliance
Parker Tax Publishing - Tax Research
Tax Research Articles Tax Research Parker's Tax Research Articles Accounting Research CPA Client Letters Tax Research Software Client Testimonials Tax Research Software tax research

Affordable Federal Tax Research Parker Tax Publishing, Parker Tax Pro Library

Affordable Federal Tax Research



Rent Expenses Denied where Taxpayers Did Not Put Forth Reasonable Effort to Find Paying Renters (Parker's Federal Tax Bulletin: April 22, 2013)

The taxpayers could not take rent expense deductions where they made no effort to change their strategy after being unable to find a rent-paying tenant for over 30 years. Meinhardt v. Comm'r, T.C. Memo. 2013-85 (3/27/13).

Donald Meinhardt worked full time at an architectural firm. His wife, Arvilla, operated a day care center out of the couple's home. In 1976, the Meinhardts bought approximately 140 acres of land that was improved with a farmhouse and outbuildings and that also consisted of crop land and pasture land. The couple rented out the farmland separately from the farmhouse. Since buying the land, the Meinhardts have had numerous local farmers lease the crop land and the pasture land. The couple attempted to rent out the farmhouse but were unsuccessful in finding tenants to rent the house in exchange for cash.

From 1976 through 2007, various individuals lived in the farmhouse at different times, often exchanging services (such as repairs and maintenance on the farmhouse) for use of the house. Over the years, the occupants included Arvilla's brother, who lived in the farmhouse seasonally for 20 years; the Meinhardts' daughter and her husband, who lived in the farmhouse for four years; and the Meinhardts' son and his family, who lived in the farmhouse for three months. The Meinhardts never received rent for use of the farmhouse. At various other times, the farmhouse remained vacant. The Meinhardts did not keep or present any detailed records of the value of these barter exchanges or the fair market rental value of the farmhouse.

For 2005-2007, the Meinhardts reported on Schedule E approximately $32,000 in rental income from the rental of crop and pasture land and expenses of approximately $74,500. The expenses consisted of insurance, supplies, repairs, and other expenses associated with the farmhouse. According to the Meinhardts, the farmhouse was available for rent during the years at issue.

The Tax Court denied the rent expense deductions, concluding that because the taxpayers made no effort to change their strategy after being unable to find a rent-paying tenant for over 30 years, they had not put forth a reasonable effort to rent out the farmhouse. Additionally, the fact that the taxpayers allowed individuals to live in the house rent free connoted personal use to the court.

In reaching its conclusion, the Tax Court cited Ray v. Comm'r, T.C. Memo. 1989-623, in which the taxpayer deducted expenses in connection with a house inherited from her mother, which had never been offered for rent or for sale. The taxpayer in Ray claimed the expenses were ordinary and necessary expenses paid for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income within the meaning of Code Sec. 212(1) or (2). The Ray court concluded that, given the almost universal experience with appreciating residential property (which was the case at the time), something more was required than a taxpayer's mere statement that he or she held residential property for investment purposes. The totality of the facts and circumstances convinced the court in Ray that the taxpayer did not possess the requisite profit objective and found similarly in the case of the Meinhardts.

Staff Editor Parker Tax Publishing

Don't miss our Complimentary Federal Tax Bulletin: March 27, 2013.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

Parker Tax Pro Library - An Affordable Professional Tax Research Solution.

Professional tax research

We hope you find our professional tax research articles comprehensive and informative. Parker Tax Pro Library gives you unlimited online access all of our past Biweekly Tax Bulletins, 22 volumes of expert analysis, 250 Client Letters, Bob Jennings Practice Aids, time saving election statements and our comprehensive, fully updated primary source library.

Parker Tax Research

Try Our Easy, Powerful Search Engine

A Professional Tax Research Solution that gives you instant access to 22 volumes of expert analysis and 185,000 authoritative source documents. But having access won’t help if you can’t quickly and easily find the materials that answer your questions. That’s where Parker’s search engine – and it’s uncanny knack for finding the right documents – comes into play

Things that take half a dozen steps in other products take two steps in ours. Search results come up instantly and browsing them is a cinch. So is linking from Parker’s analysis to practice aids and cited primary source documents. Parker’s powerful, user-friendly search engine ensures that you quickly find what you need every time you visit Our Tax Research Library.

Parker Tax Research Library

Dear Tax Professional,

My name is James Levey, and a few years back I founded a company named Kleinrock Publishing. I started Kleinrock out of frustration with the prohibitively high prices and difficult search engines of BNA, CCH, and RIA tax research products ... kind of reminiscent of the situation practitioners face today.

Now that Kleinrock has disappeared into CCH, prices are soaring again and ease-of-use has fallen by the wayside. The needs of smaller firms and sole practitioners are simply not being met.

To address the problem, I’ve partnered with a group of highly talented tax writers to create Parker Tax Publishing ... a company dedicated to the idea that comprehensive, authoritative tax information service can be both easy-to-use and highly affordable.

Our product, the Parker Tax Pro Library, is breathtaking in its scope. Check out the contents listing to the left to get a sense of all the valuable material you'll have access to when you subscribe.

Or better yet, take a minute to sign yourself up for a free trial, so you can experience first-hand just how easy it is to get results with the Pro Library!


James Levey

Parker Tax Pro Library - An Affordable Professional Tax Research Solution.

    ®2012-2017 Parker Tax Publishing. Use of content subject to Website Terms and Conditions.

IRS Codes and Regs
Tax Court Cases IRS guidance