After concessions1 by the parties, the issues remaining for
our consideration are: (1) Whether petitioners are entitled to
deduct losses from charter activities of two boats, which were
passed through to petitioners from their wholly owned S
corporation, "Island Ventures, Inc."; (2) whether petitioners are
entitled to deduct losses attributable to the rental of
residential property located in the Lake Tahoe area (the Tahoe
property); (3) whether petitioners are entitled to deduct
automobile expenses attributable to Mrs. Hilliard's self-
employment activity in an amount greater than that allowed by
respondent and, if not, whether petitioners are liable for
additional self-employment tax; (4) whether petitioners are
entitled to deduct mortgage interest in an amount greater than
that allowed by respondent; (5) whether petitioners are liable
for additions to tax for negligence; and (6) whether petitioners
are liable for additions to tax for substantial understatement of
their tax liability.
The question of whether petitioners are entitled to deduct
1 Petitioners conceded that: (1) Respondent's $11,992
investment tax credit recapture adjustment for 1987 is correct;
(2) respondent's adjustments regarding the Tahoe property in
items d, e, and i in the Adjustment to Income (Supplemental
Schedule) in the notice of deficiency are correct if the Court
should find that the Tahoe rental activity was not for profit
under sec. 183, I.R.C., and if the activity was for profit, then
the loss limitations of sec. 280A(e), I.R.C., would apply; (3)
they are not entitled to an interest deduction for $7,153 of
points claimed for 1987; (4) $2,625 of interest claimed for 1987
with respect to the Tahoe property is not allowable; (5) $1,385
of the investment interest claimed for 1988 is not allowable; and
(6) $460 of personal interest claimed for 1987 is not allowable.
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