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controlling shareholder from a C corporation
from passive to nonpassive. See Schwalbach v.
Commissioner, 111 T.C. 215 (1998).
2. Held further: The transitional
relief provided in sec. 1.469-11(b), Income
Tax Regs., is of no benefit to petitioners in
determining their 1993 and 1994 tax liability
because sec. 1.469-4, Proposed Income Tax
Regs., 57 Fed. Reg. 20804 (May 15, 1992), PS-
1-89, 1992-1 C.B. 1219, is silent as to
whether the activities of a C corporation are
or are not attributable to the corporation's
shareholder.
3. Held further: Respondent properly
disallowed rehabilitation credits claimed by
petitioners for 1993 and 1994 because once
their net rental income for those years is
recharacterized as nonpassive, the limitation
on passive activity credits mechanically
disallows the claimed credits.
David R. Andelman and Juliette Galicia Pico, for petitioners.
Mary P. Hamilton, David N. Brodsky, and Maura A. Sullivan, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: Respondent determined deficiencies and an
accuracy-related penalty under section 6662(a) with respect to
petitioners' Federal income taxes, as follows:
Penalty
Year Deficiency Sec. 6662(a)
1993 $103,728 ---
1994 41,621 $8,324
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