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partnership and the condominium association. The employees include
a manager, assistant manager, bookkeeper, front-desk staff person,
housekeepers, and maintenance staff. The employees maintained the
partnership books and records, maintained the units and grounds,
and marketed and advertised the rental operation. The partnership
pays for the property insurance, utilities, and repairs of the
units owned by its partners.
The expenses from all of the partners' units were pooled and
shared ratably among the partners based on the partner's
partnership interest (which was based on his interest in the
condominium association) and the number of days each unit was
available for rent during the year. Petitioners shared in
partnership rental income for each day their unit was available for
rent, even if it was not actually rented.
Under the partnership agreement, each unit owner is entitled
to use his unit without charge for no more than 4 weeks during the
winter season and 4 weeks during the summer season. Should the
unit owner occupy his unit more than his/her allotted time, he is
charged 50 percent of the established regular seasonal hotel rate.
There is no limitation on the owner's occupancy during the other
periods of the year. Petitioners and/or their children used their
condominium less than 10 days during each year under consideration.
For the years under consideration, petitioners reported the
income and expenses of their Vermont condominium as a trade or
business activity on Schedule C of their tax return. In 1991, they
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Last modified: May 25, 2011