IRC §469 audit defense
Document every property management decision—automatically.
EvidenceGraph records your calls with property managers, transcribes them, and extracts management decisions into an audit-ready report. Defend your 100-hour material participation threshold without spreadsheets or guesswork.
How it works
Call or upload
Get an EvidenceGraph phone number for each property and call your manager through it—or upload an mp3 you recorded yourself. Both ingest the same way.
Transcribe & extract
Calls are automatically transcribed. AI then reads the transcript and pulls out every management decision, categorized and time-estimated.
Audit-ready PDF
Generate a §469 compliance report for any tax year. Cover page, summary, decision log, and the compliance statement. Download and share with your CPA.
Built for the way you already work.
You're already on the phone with property managers, contractors, and tenants. EvidenceGraph captures the documentation as a byproduct of work you'd do anyway—no logging, no spreadsheets, no after-hours record keeping.
- One dedicated phone number per property—dial it like any contact.
- You review and approve every extracted decision before it counts.
- Original recordings + transcripts kept for verification.
- Encrypted at rest. You own your data; export any time.
IRC §469 material participation, explained
The passive activity loss rules decide whether you can deduct rental real estate losses against your other income. Here are the questions real estate investors ask most about material participation and audit defense.
- What is IRC §469 material participation?
- Internal Revenue Code §469 contains the passive activity loss rules. Rental real estate is generally treated as passive, but if you materially participate—meaning your involvement is regular, continuous, and substantial—the activity can be treated as non-passive, which lets you deduct losses against other income. Material participation is judged by the seven tests in Treasury Regulation §1.469-5T.
- How many hours do I need for material participation?
- The most common threshold is more than 500 hours in the activity during the tax year. You can also qualify with more than 100 hours if no other individual (including a property manager) participates more, or by performing substantially all of the work yourself, among the other §1.469-5T tests.
- What are the seven material participation tests?
- Treasury Regulation §1.469-5T provides seven: (1) more than 500 hours; (2) you do substantially all the work; (3) more than 100 hours and no one participates more; (4) significant participation activities totaling more than 500 hours; (5) material participation in any 5 of the prior 10 years; (6) a personal service activity for any 3 prior years; and (7) a facts-and-circumstances test of regular, continuous, and substantial involvement.
- What is the real estate professional 750-hour test?
- Under §469(c)(7), you qualify as a real estate professional if you spend more than 750 hours, and more than half of your total personal-service time, in real property trades or businesses in which you materially participate. Qualifying lets you treat materially-participated rental activities as non-passive.
- How do I prove material participation in an IRS audit?
- The regulations let you establish participation by any reasonable means, but the IRS and the Tax Court routinely reject after-the-fact estimates and "ballpark guesstimates." Contemporaneous records—logs created as the work happens, with the date, time, and a description of each activity—are the strongest evidence.
- How does EvidenceGraph help with §469 audit defense?
- EvidenceGraph turns the calls you already make about your properties into contemporaneous documentation: each call is recorded, transcribed, and mined for the management decisions you made, with time estimates. You review and approve them, then generate an audit-ready PDF report for any tax year to share with your CPA.
EvidenceGraph is record-keeping software, not a tax advisor. Consult a qualified tax professional about your specific situation.