A taxing decision for rentals When do residential rental activities amount to a business? A recent case supports the proposition that owning as few as five residential rental properties can amount to carrying on a business. Lindsay Ng, NZICA Tax Manager, analyses the decision in TRA 012/11 [2012] NZTRA 02. Inland Revenue (IR) has had a win in the Taxation Review Authority (TRA) where it was held that the ownership of five residential rental properties amounted to the carrying on of a business. As a result the rental losses derived, which had been included by the taxpayer in calculating her entitlement to Working for Families tax credits (WfF), were disallowed. The facts The facts in TRA 012/11 are summarised below.  The taxpayer is a self-employed artist who is married with five children. She registered for WfF in April 1999.  In the course of a tax investigation IR discovered that the taxpayer owned five residential rental properties in partnership with her husband.  The properties were purchased between April 2003 and September 2007 with small deposit amounts.  The taxpayer engaged a property manager to manage the five rental properties in December 2007.  An accountant was engaged to prepare rental accounts and tax returns. The key issue to be determined in the TRA was whether or not the residential rental activities amounted to a "business" as defined in section OB 1 of the Income Tax Act 2004. This is because, under the WfF rules applicable to this case,