Dangers of the Self-Rental Tax Trap


Understanding the intent and application of the rules surrounding passive activity losses can be very challenging for taxpayers. The potential impact of these rules and their effect on transactions and investments can be quite negative if not handled correctly ahead of time.  One of these potential pitfalls under the passive activity loss rules is the treatment of self-rentals. Many tax preparers have a general awareness of the self-rental rules, but they may not be aware of the many different situations in which these rules may be applied.

This video-based course presents a comprehensive overview of Internal Revenue Code Section 469 (Passive Activity Losses and Credits Limited) which governs the treatment of losses and credits from passive activities such as rental property. The definition of a self-rental is discussed along with the circumstances in which income may be recharacterized as non-passive. The grouping of activities is presented as well as the application of the self-rental rules to different types of business entities and the different types of income they may receive. The presentation is supported by the discussion of a number of Tax Court cases and other examples where the self-rental rules have been applied.

The course features Robert Cross, PA, ABA, ATA who has 30 years of experience in preparing taxes for businesses of different types and is Past President of the National Society of Accountants (NSA).

Learning Objectives

After completing this course, students will be able to:

  • identify the conditions that must be met for a given property rental to be classified as a self-rental situation
  • given a set of grouped activities, including a self-rental, identify the tax treatment of losses and gains from those activities
  • identify the general accounting treatment of tax credits that may arise from a self-rental activity
  • identify the general tax treatment available to the IRS when a self-rental property is rented at below or above the fair market rate

Designed For

CPAs, EAs, and other tax professionals


Familiarity with common operating methods and practices for small businesses, as well as concepts of passive activities and the carrying forward of losses and credits.

WebCE® is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.
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