Professional Tax Research Solutions from the Founder of Kleinrock. tax and accounting research
Parker Tax Pro Library
Accounting News Tax Analysts professional tax research software Like us on Facebook Follow us on Twitter View our profile on LinkedIn Find us on Pinterest
federal tax research
Professional Tax Software
tax and accounting
Tax Research Articles Tax Research Parker's Tax Research Articles Accounting Research CPA Client Letters Tax Research Software Client Testimonials Tax Research Software Federal Tax Research tax research

Accounting Software for Accountants, CPA, Bookeepers, and Enrolled Agents

CPA Tax Software



Dentist Qualifies as Real Estate Professional; Rental Real Estate Losses Are Deductible

(Parker Tax Publishing March 2017)

The Tax Court held that a dentist's logs of real estate activities, as well as testimony from various witnesses, established that he spent the requisite amount of time on real estate activities to qualify as a real estate professional. Accordingly, he was entitled to deduct his rental real estate losses against the income from his and his wife's dental practice. Zarrinnegar, T.C. Memo. 2017-34 (2/13/17).


Mohammad Zarrinnegar and his wife, Mary, owned and operated two businesses during 2010, 2011, and 2012: a dental practice and a real estate business. They are both dentists and, during the years at issue, worked at their joint dental practice in shifts. Mary worked Mondays, Wednesdays, Thursdays, and Fridays from 9 a.m. until 2:30 p.m. and some Saturdays from 8 a.m. until 12 p.m. Mohammad worked at the dental practice Mondays, Wednesdays, Thursdays, and Fridays from 2:30 p.m. until 6 p.m.

The couple's real estate business consisted of Mohammad's real estate brokerage activity and four rental properties that the couple owned and that Mohammad managed. Mary did not participate in the real estate business.

Mohammad spent hundreds of hours on brokerage-related activities, including brokers' tours, listing searches, open houses, property viewings, and client meetings. He also spent significant time each year managing the couple's four rental properties. All told, Mohammad spent over 1,000 hours on the real estate business during each year at issue.

The dental business showed a net profit of approximately $468,000, $322,000, and $381,000 for 2010, 2011, and 2012, respectively. These amounts were reported on the couple's tax returns for those years along with losses from the real estate business of $222,000 for 2010; $242,000 for 2011, and $221,000 for 2012. The IRS disallowed the losses because it determined that they were passive activity losses. The couple disagreed and took their case to the Tax Court.


As a general rule, Code Sec. 469(c)(2) provides that rental activities are per se passive whether or not the taxpayer materially participates. Thus, losses from such activities are passive losses that are deductible only against passive income. As an exception, however, rental activities of taxpayers in real property trades or businesses (i.e., a real estate professionals) are not treated as passive if the material participation requirement under Code Sec. 469(c)(7) is satisfied. Under that provision, a taxpayer is a real estate professional if:

(1) more than one-half of the personal services performed in trades or businesses by the taxpayer during such tax year are performed in real property trades or businesses in which the taxpayer materially participates; and

(2) such taxpayer performs more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participates.

Before the Tax Court, the couple offered Mohammad's testimony and logs of hours for 2010, 2011, and 2012. Mohammad testified at great length about the logs' contents and was able to recall extensive details relating to the entries. Each log showed that Mohammad spent more than 1,000 hours per year on real estate activities. Mary also testified, as well as several other witnesses.

The court found that all the testimony offered in the case was credible and that it corroborated Mohammad's logs and testimony. Accordingly, the court concluded that Mohammad worked more than 1,000 hours per year at the real estate business and worked fewer than 1,000 hours per year at the dental practice, satisfying both elements of the real estate professional test. Thus, the taxpayers had met material participation requirement under Code Sec. 469(c)(7) and were entitled to deduct the rental real estate losses incurred during the years at issue.

For a discussion of the deductibility of rental real estate losses by real estate professionals, see Parker Tax ¶247,120.

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