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(1) Whether petitioner's expenditures related to
residential real property were paid or incurred in carrying on a
trade or business pursuant to section 162 or for the production
of income pursuant to section 212. We hold that most of these
expenditures are not deductible under either section.
(2) Whether petitioner is liable for a penalty pursuant to
section 6662(a) for negligence or disregard of rules or
regulations. We hold that petitioner is liable for the penalty.
All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
We have combined our findings of fact and opinion. Some of
the facts are stipulated and are so found. We incorporate by
reference the stipulation of facts and attached exhibits.
Petitioner resided in Wallingford, Connecticut, at the time
he filed the petition in this case. Petitioner was a cash basis
taxpayer for the taxable year 1990. He was employed full time as
a policeman in Wallingford, Connecticut.
In 1989, petitioner purchased a single-family home on Cape
Cod at Harwichport, Massachusetts, for $114,000. This was
petitioner's first real estate purchase. Petitioner never
occupied the home as a personal residence, and he never intended
to do so. Petitioner originally intended to profit by selling
the property as opposed to renting it. When petitioner purchased
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