Ronald I. and Lois B. Koenig - Page 16

                                       - 16 -                                         

          arrived.  Mrs. Koenig would sometimes perform these tasks herself           
          or would make arrangements for the services to be performed.                
               Petitioners assert that they are entitled to the full amount           
          of the rental loss because they were actively engaged in the                
          trade or business of renting real property.  Accordingly, they              
          argue their loss is fully deductible under section 162 because              
          the expenses were incurred in their rental property trade or                
          business.5                                                                  
               Section 162(a) provides in relevant part that "There shall             
          be allowed as a deduction all the ordinary and necessary expenses           
          paid or incurred during the taxable year in carrying on any trade           
          or business".  The regulations promulgated thereunder state that            
          only those ordinary and necessary business expenses "directly               
          connected with or pertaining to the taxpayer's trade or business"           
          may be deducted.  Sec. 1.162-1(a), Income Tax Regs.                         
               Section 469(a) generally disallows all passive activity                
          losses.  The term "passive activity" includes any rental                    
          activity.  Sec. 469(c)(2).  Section 469(i) provides an exception,           
          however, to this complete disallowance.  Section 469(i) allows a            
          taxpayer who "actively participates" in a rental activity to                


               5    Petitioners originally argued that they were entitled             
          to the full amount of the claimed loss pursuant to sec.                     
          469(c)(7).  The year in issue is 1990.  Sec. 469(c)(7) did not              
          become effective until taxable years beginning after Dec. 31,               
          1993.  See Omnibus Budget Reconciliation Act of 1993, Pub. L.               
          103-66, sec. 13143(a), 107 Stat. 312, 440.                                  




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011