Tax Blog/Blawg

Back in the era of beepers, being "on call" evoked imagery of importance.  Indeed, those people required by their job to carry a beeper, along with those who did so voluntary, displayed the devices with a noticeable degree of smugness.  The positive aspects of this status symbol aside, anyone who has been obligated to carry a beeper or its modern equivalent (e.g., BlackBerry, iPhone, PalmPilot, etc.) understands that being constantly reachable is often more of a curse than a blessing.

Many jobs mandate that a person respond to messages within a certain period of time, minimize travel so that one can be at the office quickly if necessary, avoid alcohol at all times to ensure constant preparedness to work, etc.  Given this reality, it is understandable that many people who are perpetually "on call" feel that they are always working, continuously performing.

This concept is at the core of a recent Tax Court case, Moss v. Commissioner, 135 T.C. No. 18 (Sept. 20, 2010), where the taxpayer claimed that all the time he spent "on call" with respect to his rental real estate business should be counted in determining whether he met the necessary participation standards.  The attached article, called "If You're On Call, You're Out of Luck in Passive Activity Cases,” analyzes Moss v. Commissioner and the three important rulings this case contains:  (i) in determining whether a taxpayer "materially participates" in an activity, only time the taxpayer actually spends performing services can be counted; (ii) the fact that a taxpayer is "on call" and thus available to field inquiries, take actions, etc. does not constitute performing services; and (iii)  the regulations permit a taxpayer to establish participation by "any reasonable means," but simply allocating an arbitrary portion of the total "on call" time is not reasonable.  The article was published in Practical Tax Strategies.