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Issue 3. Net Loss for Rental Real Property
Respondent determined that petitioners' net loss for rental
real property in 1990 is limited to $25,000. Petitioners assert
that they are not limited by the $25,000 rental loss allowance
and that they are entitled to deduct $57,975, the full amount of
their loss.
During 1990, petitioners owned five separate parcels of
rental real property. Four of the properties were located in
Scottsdale, Arizona (the Scottsdale properties), and one was
located in Sumner, Washington (the Sumner property). The
Scottsdale properties, which comprised two townhomes and two
condominiums, were upscale, resort-oriented properties with
numerous amenities. The Sumner property was a lakefront single-
family dwelling with an unobstructed view of Mt. Rainier.
Lois B. Koenig (Mrs. Koenig) personally conducted the
leasing activities for the Sumner property. Petitioners engaged
Racquet Club Realty to act as a rental broker to locate tenants
for the Scottsdale properties.
Mrs. Koenig was responsible for the management, maintenance,
and operation of the rental properties. Her responsibilities
included collecting rents and arranging for necessary repairs.
In addition, when tenants moved out, it was necessary to clean
and sometimes paint the rental properties before new tenants
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