Tax News

CCH (cch.taxgroup.com) reports:

  An individual who owned a majority interest in a C corporation engaged in the retail sale of granite and marble was prohibited by the passive activity loss rules from offsetting nonpassive wage income received from the C corporation with passive rental losses from his solely-owned limited liability company (LLC). Although the limited liability company was engaged in the business of renting a warehouse to the C corporation, Reg. §1.469-4(d)(5)(ii) specifically limited the aggregation of the activities of the taxpayer conducted through the C corporation with the activities he conducted through the LLC solely for purposes of determining whether he materially or significantly participated in the activities of the LLC. The taxpayer's contention that the limitation imposed by Reg. §1.469-4(d)(5)(ii) only applies when unrelated activities are grouped was rejected as contrary to its plain meaning. Since the taxpayer's rental activities in the LLC were per se passive whether or not he materially participated in them and the taxpayer had no passive income, the losses were not deductible.

C.A. Senra, TC Memo. 2009-79, Dec. 57,789(M)

Other References:

 
Code Sec. 469

  CCH Reference - 2009FED ¶21,966.53

  CCH Reference - 2009FED ¶21,966.568

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 33,102.25