Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

In identifying the correct treatment of income from an activity, it may be necessary to question the
taxpayer directly.
Whenever an agent encounters a Passive / Non-Passive situation it is suggested the MSSP guide
on Passive Activity Losses be referenced for a more detailed discussion of the passive loss rules
and suggestions for audit techniques of passive loss issues.
Conclusion
The most efficient way of looking for a passive issue is through the lense of financial status. Also
see the chapter on Financial Status in this Guide. Did the taxpayer through some device mitigate
his tax liability with respect to a passive loss? If so, a close scrutiny of the means by which this
was accomplished is warranted and often productive.
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