Chester F. and Faye L. Sidell - Page 8

                                        - 8 -                                         

          Notice of Deficiency                                                        
               In the notice of deficiency dated March 11, 1998, respondent           
          recharacterized the positive 1993 income from the Everett Mill and          
          Kunhardt Mill properties and the positive 1994 income from the              
          Everett Mill and FLS Realty Trust properties from passive to                
          nonpassive pursuant to section 1.469-2(f)(6), Income Tax Regs.; the         
          recharacterization resulted in petitioners' 1993 and 1994 taxable           
          income being increased by $45,030 and $42,505, respectively. In             
          addition, as a consequence of respondent's recharacterization,              
          respondent determined that petitioners' regular tax liability               
          allocable to all passive activities for 1993 and 1994 was                   
          insufficient to enable them to use the rehabilitation credits               
          claimed for those years.  See sec. 469(d)(2).                               
               Central to the dispute in this case is the validity of the so-         
          called self-rented property rule contained in section 1.469-                
          2(f)(6), Income Tax Regs., which provides:                                  
                    Property rented to a nonpassive activity.--An amount              
               of the taxpayer's gross rental activity income for the                 
               taxable year from an item of property equal to the net                 
               rental activity income for the year from that item of                  
               property is treated as not from a passive activity if the              
                         (i)  Is rented for use in a trade or                         
                    business activity * * * in which the taxpayer                     
                    materially participates * * * for the taxable                     
          Pursuant to this rule, and by virtue of the attribution rule of             

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