The question of what constitutes a “trade or business” under the Internal Revenue Code is not a new one. However, its importance has been magnified by certain provisions in the 2017 tax legislation introduced as the Tax Cuts and Jobs Act (the TCJA) that hinge on the presence or absence of a trade or business. Unfortunately, while there is a significant amount of case law that addresses this question, the inquiry is very fact-specific and answers to a number of key questions remain unclear. With this backdrop, a recent Tax Court case addressing whether a taxpayer was engaged in a real estate trade or business has a newfound significance.

‘Levitz v. Commissioner’

In the recent case Levitz v. Commissioner (T.C. Summary Opinion 2018-10), the Tax Court considered whether an attorney’s involvement with real estate activities was sufficient to constitute a trade or business. In 2003, the taxpayer had purchased a condominium unit that he remodeled and sold. In 2004, the taxpayer signed contracts to purchase five condominium units in Florida. However, due to a lack of funds, he ended up forfeiting his deposits on four of them in 2008. He appears to have sold the remaining condominium unit for a small profit in 2008.