No Records, No Deductions: Court Denies Real Estate Tax Breaks!

“Ordinary and necessary” business expense tax deductions are allowed when carrying on an active trade or business. In one case, a taxpayer engaged in real-estate-related activities. His business expense and depreciation deductions were denied by the U.S. Tax Court. The court ruled that the activities didn’t constitute an active trade or business. Instead, the property was held for investment purposes. In addition, the deductions weren’t substantiated because adequate records weren’t kept. The taxpayer appealed. The 9th Circuit U.S. Court of Appeals agreed with the Tax Court. The court ruled the taxpayer “failed to provide sufficient evidence of his claimed deductions.” (Cardulla, 7/17/25)