Real estate professional (REP) status allows qualifying taxpayers to deduct rental real estate losses against ordinary income — bypassing the passive activity loss rules that otherwise limit these deductions to $25,000 or less. The IRS aggressively targets REP status claims because they frequently result in six- and seven-figure deductions that dramatically reduce taxable income for high-net-worth investors. Defending your REP status requires detailed contemporaneous time logs, proof of material participation in each rental activity, and a thorough understanding of the 750-hour and more-than-half tests. Neil Jesani Tax Resolution has successfully defended hundreds of real estate professionals facing IRS challenges to their passive loss deductions, preserving millions in legitimate tax savings for our clients nationwide. Why Does the IRS Target Real Estate Professional Status Claims? Real estate professional status is one of the most frequently challenged tax positions on high-income returns. The IRS knows that REP status allows taxpayers to convert what would otherwise be passive rental losses into non-passive losses that offset W-2 income, business profits, and investment gains. When a taxpayer earning $500,000 or more in ordinary income claims $200,000 or more in rental losses, it creates an immediate red flag in the IRS's automated screening systems. The Discriminant Information Function (DIF) scoring algorithm assigns higher audit potential scores to returns with large rental losses relative to other income sources. The IRS Wealth Squad and high-income audit units have made REP status a top enforcement priority. Examiners are specifically trained to scrutinize time logs, question the nature of activities claimed as "real estate trades or businesses," and challenge whether taxpayers truly spent more than half their working hours in real property activities. The stakes are high: if the IRS successfully denies your REP status, all rental losses claimed in the audit year — and potentially in prior years —...