4 - Memo

MEMORANDUM TO: [Partner’s name], Partner FROM: [Your Name], Staff CPA DATE: January 3, 2024 SUBJECT: Detailed Analysis of Private Letter Ruling (P.L.R.) 9251003 under I.R.C. Section 469 Dear [Partner’s name], I hope you are doing well. I am writing regarding your request for research and analysis of Private Letter Ruling (P.L.R.) 9251003, 8/31/1992, I.R.C. Sec(s). 469. As I have already conducted the request, I have attached my careful analysis in the following sections. Facts As you may already know, PLR 9251003, issued on August 31, 1992, involves a taxpayer who was a limited partner in several partnerships engaged in commercial real estate. During 1987 and 1988, these partnerships incurred preconstruction and development expenses. In line with this, the taxpayer is an employee of the management company overseeing these projects and initially reported these expenses as passive activity losses under I.R.C. Section 469. However, it must be noted that post the issuance of section 1.469-4T of the temporary Income Tax Regulations in May 1989, the taxpayer filed amended returns treating these activities as trade or business in which they materially participated. Issues Upon reading this letter, plenty of issues may be seen. However, the most pressing issue is whether the taxpayer can deduct preconstruction expenses as trade or business activities under I.R.C. Section 469, even though the final activity is classified as a passive rental activity. Analysis Supported by the Tax Law Upon conducting a thorough research and analysis, I found out that the intricate analysis of this ruling revolves around the interpretation of I.R.C. Section 469, which governs passive a...