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5. Whether the Result of Concluding That Petitioner Did
Not Elect Under Section 469(c)(7) Is Too Harsh
Petitioner contends that in deciding whether a taxpayer
properly elected, we must consider whether the sanction imposed
on the taxpayer for failure to comply would be excessive and out
of proportion to the default. Petitioner contends that the
result here is harsh and out of proportion to any failure to
elect properly. Petitioner cites American Air Filter Co. v.
Commissioner, 81 T.C. 709, 719 (1983), to support his contention
that we must consider the harshness of the result if we find that
he did not elect as he claimed.
In American Air Filter Co. v. Commissioner, supra, we
considered whether the result was harsh as a factor in deciding
whether the taxpayer substantially complied with regulations
which stated how to make an election. American Air Filter Co.
does not apply here because the issue here is not whether
petitioner substantially complied with a regulation. If
petitioner did not elect under section 469(c)(7) in 1994 as he
contends, then his 1994 and 1995 losses are suspended under
section 469(b) as they were in years before 1994, and he may not
deduct the rental losses that he incurred in 1994 and 1995. We
do not believe that result is harsh or out of proportion to
petitioner’s failure to elect.
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