Reduced a $312K IRS deficiency notice to $4,800 in 90 days
A short-term rental investor received a CP2000 escalating to a Notice of Deficiency. The IRS challenged depreciation, material participation, and a §1031 exchange. We responded with a 47-page reply package.
- ▸Notice of Deficiency was 14 days from a Tax Court petition deadline.
- ▸Prior preparer's documentation was incomplete — no cost-segregation study on file.
- ▸Material participation hours were claimed but not contemporaneously logged.
Filed Tax Court petition (protective)
Filed within the 90-day window to preserve all rights while we built the substantive response.
Commissioned a retroactive cost-seg
Engaged a partner cost-seg firm; reclassified $480K of basis into 5-, 7-, and 15-year property.
Reconstructed participation hours
Pulled calendar exports, email metadata, and credit-card geolocation to substantiate 612 hours — well above the 500-hour STR threshold.
Negotiated through Appeals
Conceded a small §1031 boot calculation; IRS conceded the depreciation and material-participation challenges in full.
- 98.5% reduction in proposed liability.
- Permanent §469(c)(7) real-estate-professional status documented for future years.
- Client now operates under a quarterly compliance retainer.
"I was preparing to liquidate units to pay the IRS. Instead I owed less than the cost of one HVAC repair."
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