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phase-in of the disallowance of losses and credits
attributable to interests held on the date of enactment
of section 469, defined as "pre-enactment [interests]" by
section 469(m)(3)(B). Similarly, losses from passive
activities for the taxable year can be offset against the
income from passive activities for that year. See sec.
469(d)(1).
The Forms 8582 filed by petitioners for 1987 claim
a deduction for the portion of petitioners' passive
activity losses attributable to "pre-enactment [interests]"
under the phase-in of disallowance rules set forth in
section 469(m). Similarly, the Forms 8582 filed with
petitioners' 1988 returns suggest that the losses from
certain passive activities were offset by income from other
passive activities. See sec. 469(d)(1). Respondent's
briefs do not explain why petitioners' ineligibility for
the $25,000 offset for rental real estate activities
provided by section 469(i) is in any way related to the
passive activity losses claimed by petitioners on the
Forms 8582 filed for 1987 and 1988. We perceive no
connection. Accordingly, we reject respondent's second
reason for disallowing the partnership losses.
Respondent's first reason for disallowing the
partnership losses is that petitioner had "insufficient
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