Gerald L. and Joy M. Zeidler - Page 15

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          proscribed by section 280A(d)(1), and, therefore, section 280A(a)           
          applied.  Alternatively, respondent disallowed some of the                  
          expenses claimed as to both properties for lack of                          
          substantiation.  The amounts disallowed were $4,876, $4,400, and            
          $3,567, respectively, for 1990, 1991, and 1992.5                            
               Section 280A(a) provides generally that, in the case of an             
          individual or an S corporation, no deduction otherwise allowable            
          shall be allowed with respect to the use of a dwelling unit that            
          is used by the taxpayer during the taxable year as a residence,             
          except as otherwise provided in section 280A.  Section 280A(d)(1)           
          provides generally that a taxpayer is considered as using a                 
          dwelling unit as a residence if the taxpayer uses the unit for              
          personal purposes during the taxable year for the greater of 14             
          days or 10 percent of the number of days the unit is rented at a            
          fair rental.  In such circumstances, where a unit is put to a               
          rental use and is also used by the taxpayer as a residence, the             
          deduction of expenses attributable to the dwelling unit is                  
          limited to the gross rental income derived from the property.               
          Sec. 280A(c)(5).                                                            

               The amounts disallowed for 1990 and 1991 do not include the            
          depreciation claimed on the rental unit as to which respondent              
          applies sec. 280A.  The notices of deficiency for these 2 years             
          include a separate adjustment disallowing the depreciation                  
          claimed on this property for the additional reason that                     
          petitioners had no depreciable basis in the property.  That same            
          issue carries over to 1992 in respondent's disallowance of the S            
          corporation loss.  The depreciation adjustment, therefore, is               
          addressed as a separate issue.                                              

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