White v. Comm'r, 2013 T.C. Summary Opinion 86

David White and Debra McNicoll owned two residential rental properties (Bremerton, WA and Colorado Springs, CO) and lived in Pacifica, CA; reported rental losses on Schedules E for 2009 and 2010.
Petitioners reported rental losses of $19,935 (2009) and $26,368 (2010) that exceeded rental income and sought to offset those losses against other income.
Mr. White worked full time (25 hrs/wk until Nov 2009, then 40 hrs/wk in Nov–Dec 2009 and all of 2010) and performed repair/management tasks for the rentals outside work hours.
During the audit petitioners provided estimates of annual hours Mr. White spent on rental activities: first 832 hrs (letter), then 768 hrs (monthly breakdown), and at trial produced a schedule claiming 2,002 hrs/year.
Petitioners did not make the election to treat all rental properties as a single activity and offered no contemporaneous logs or corroborating records of hours; Mrs. McNicoll offered no time evidence.
The Tax Court evaluated whether Mr. White qualifies as a real estate professional under section 469(c)(7) (i.e., >750 hrs/year in real property trades and more than half of his personal services) and found petitioners’ time evidence insufficient and uncorroborated.

Issue	White's Argument	Commissioner’s Argument	Held
Whether petitioners can deduct rental losses against nonpassive income by qualifying as a real estate professional under §469(c)(7)	Mr. White contends he materially participated and performed >750 hrs/yr (submitted estimates: 832, 768, later 2,002 hrs)	Commissioner argues hours are unsubstantiated, estimates are inconsistent and unrealistic, and Mr. White’s personal services in rentals do not exceed his work hours	Court held petitioners failed to substantiate hours or show >50% of personal services in real estate; losses remain passive and nondeductible against other income

(No officially reported cases with reporter citations were cited as binding authority in the opinion.)