Passive activity losses (PALs) can generally only offset passive activity income, not employment income, unless the taxpayer is a real estate professional. One married couple had income from his job as an engineer, and PALs from her managing their rental properties. They claimed the PALs against his employment income and submitted time logs to show she materially participated in the rental activities. The IRS found her time logged fell short of the 750-hour threshold to qualify as a real estate pro and denied the PALs. The Tax Court agreed. (TC Memo 2018-169)

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