However, if the rental real estate activities of the real estate professional are not section 162 trades or businesses, the gross income from rents derived from such activity will not be excluded under section 1411(c)(1)(A)(i) by the ordinary course of a trade or business exception.
Finally, the source of the unreported assets cannot be derived from illegal activity. (For this purpose, the proceeds of a tax evasion scheme from a legitimate business are not deemed to be from an illegal activity.) If all of these elements of voluntary disclosure are met, the IRS generally will not prosecute the taxpayer for the noncompliance.