Two Sum. Op.s from the NY Duo of STJs Diana L. (“Sidewalks of New York”) Leyden and STJ Eunkyong (“N’Yawk”) Choi today.

Magdy A. Ghaly and Laila Ryad, T. C. Sum. Op[. 13, filed 4/3/23. Magdy lost his job, drew down  from his “retirement company” (IRA? 401(k)?) and defaulted on a loan therefrom. He started new accounts two years later, to try to replenish what he had taken. Of course, he neither reported nor paid tax on what he had taken out. And was under 59-1/2 when he took it out. IRS drops the chops. Of course, Magdy has to pay the tax and interest.

Robert L. Drocella and Pamela M. Drocella, T. C. Sum. Op. 2023-12, filed 4/3/23. Rob and Pam, both full-time employees, claim real estate pro status on their six real estate rentals. Rob and Pam never establish what hours they worked as employees, but did have logs of time worked on the real estate. IRS stips to the logs, but not the truth or otherwise thereof. The logs show Rob meets the 750 hour test, but Pam does not. Even so, in the absence of proof of what hours each spent in their day jobs, they can’t pass the Section 469(c)(7)(b)(i) test: more than one-half of the personal services performed in trades and businesses by the taxpayer during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates. No proof the hours Rob spent on the day job were less than those he spent on the real estate. Takeaway- The 750 hours aren’t enough. Hours spent on real estate must be greater than half of all the personal services you provide.