The Tax Court has ruled in favor of a landlords who due to a lack of tenants wanted a write-off of rental losses.
The details: After buying a home, the owner moved away and rented the property out for years. After her last tenant moved out, she was unable to rent it despite her best efforts (and a bad economy). So she had rental losses. This tends to happen when you have bills and no revenue.
The IRS examiner denied her rental losses because of the lack of rental income, probably for lack of business purpose. The Tax Court reasonably came to her rescue and allowed the rental losses for the two years after the last tenant left. In the Court’s view, the property was still held for income-producing purposes (she was trying to rent it out) and she actively participated in the rental activity.
[Bonds, TC Summ. Op. 2011-122]