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circumstances of this case, we find that most of the
properties with respect to which petitioner received
interest income during the years in issue were not
properties held by petitioner for sale to customers in the
ordinary course of its trade or business. Thus, we find
that petitioner is a personal holding company as defined by
section 542(a), in each of the years in issue, and is
subject to personal holding company tax imposed by section
541, as determined by respondent.
Passive Loss Limitation
The second issue for decision is whether deductions
claimed on petitioner's 1992 return in the amount of
$39,186 and deductions claimed on petitioner's 1993
return in the amount of $51,416 are disallowed under
section 469(a) as passive activity losses. Resolution
of this issue turns on whether the interest income from
petitioner's purchase money obligations, described
above, is portfolio income because it was not derived
in the ordinary course of a trade or business. See sec.
469(e)(1)(A)(i)(I); sec. 1.469-2T(c)(3)(i)(A) and (ii),
Temporary Income Tax Regs., 53 Fed. Reg. 5713 (Feb. 25,
1988). If the interest income is not portfolio income,
as petitioner contends, then it is taken into account in
determining the income or loss from petitioner's rental
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