Recent tax case related to income from surgical center

In Stephen P. Hardy and Angela M. Hardy v. Commissioner, the U.S. Tax CourtĀ found that Dr. Stephen P. Hardy, a plastic surgeon who owned a minority interest in a surgical center, was allowed to treat his income from the surgical center as passive.

Dr. Hardy was not involved in the operation of the facility on a regular, continuous, and substantial basis and therefore, did not materially participate in the facility’s operation. Further, he did not invest in the facility to artificially create a passive activity loss, but had a business purpose in joining the center.

The surgical center was already established when Dr. Hardy became a member and while he could not perform procedures requiring general anesthesia in his office, but could do so at the center. Thus, he did not take a portion of his medical practice and convert it into a passive activity.

Read the full finding at