What is the name of your state (only U.S. law)? ca
First excuse me if I am using the wrong technical terms.
Here is my situation. For almost over 10 years I had my taxes done by the same accountant until he passed away. I used the same accountant as my parents to do my personal income taxes. I have since use another accountant.
Here is my question. Starting in 2005 my previous account has lower my taxable income (wages) by taking my real estate loses as a duduction. The duduction he was take was around $40,000. Although $40,000 is less than my total real estate lost (including depreciation of the buildings), He said I was allowed to take this duduction because I was involved with the management, maintanance of the real estate. The real estate we are talking about are a few house, a 7 unit apartment building, and a 12 unit apartment building which I only have 1/3. I also have a fulltime job in another field back in 2005 but not now in 2008. But I was involved in almost every aspect of the operation of the real estate. I did 80-90% of the repairs and maintanance, show the apartment out, some of the advertisement, of course I had help and from time to time I got a apartmenet manager. But they never did the maintanance.
Here is the problem. My new account said I cannot take the $40,000 deduction. He in short said because my losses from my real estate are consider passive. I can only take a maximum $25,000 duduction unless I am a real estate professional and he strongly suggest that I should amend my previous returns. He cited publication 925 from the irs.
So here is my question. Who is correct? I have read publication 925 (I can only find the 2007 version not the 2005 version) it seem to support the position of my 2nd accountant.
1. But my question here is are there some gray areas here or exceptions that my 2nd account is not aware of?
2. Also was the law different in 2005. Can any point me the 2005 version of publication 925. And is there a 2008 version (doe these thing change from year to year?) or you only know when you are doing your taxes (ie after the fact).