Back to my friends that I previously wrote about who misunderstood passive activity and material participation. They are a married couple filing jointly and own a very successful business together structured as an S-corporation as well as a portfolio of rental real estate properties. They actually consider themselves privileged to have their their tax woes shared anonymously via this tax blog which is helpful as I appreciate any opportunity to share how real life scenarios are applied to the US internal revenue code.

One of the properties my friends own – titled in their personally names jointly – has as a tenant an S-Corporation in which they each also own 50% of the shares issued and outstanding. Basically they hold title to the rental property – a large office warehouse complex – and they own the corporation that rents the property. Unfortunately this rental Read More