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amount and purpose of the disallowed business expenses. As
petitioners have failed to establish at trial that they incurred
any Schedule C trade or business deductions beyond those allowed
by respondent, Cohan v. Commissioner, supra, is not applicable in
the instant case. Accordingly, we sustain respondent's
disallowance of those deductions.
The next issue to be decided is whether petitioners are
entitled to certain passive losses that respondent disallowed to
the extent of $15,966 for taxable year 1990 and $12,686 for
taxable year 1991. In the exhibits accompanying the notice of
deficiency, respondent listed petitioners' passive losses for the
taxable years in issue under the heading "PART I - RENTAL REAL
ESTATE WITH ACTIVE PARTICIPATION" and computed the extent to
which petitioners were entitled to the $25,000 offset pursuant to
section 469(i).4 During each of the taxable years in issue,
4 Sec. 469(i)(1) provides:
(1) In general.--In the case of any natural
person, subsection (a) shall not apply to that portion
of the passive activity loss or the deduction
equivalent (within the meaning of subsection (j)(5)) of
the passive activity credit for any taxable year which
is attributable to all rental real estate activities
with respect to which such individual actively
participated in such taxable year (and if any portion
of such loss or credit arose in another taxable year,
in such other taxable year).
Sec. 469(i)(2) provides:
(2) Dollar limitation.--The aggregate amount to
which paragraph (1) applies for any taxable year shall
(continued...)
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