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ground that Phillip's partnership interest had not been fully
disposed of at the end of each year in issue.
Petitioners' representative submitted a protest dated
January 2, 1996, claiming that the partnership had ceased to
exist at the end of 1991, and that Phillip had disposed of his
entire interest in the partnership. Respondent dismissed the
argument and maintained the position that Phillip had not
completely disposed of his partnership interest. Respondent
conceded this issue, however, after petitioners' counsel
presented the same argument and resubmitted the January 2, 1996,
protest. The parties' settlement of March 20, 2000, reflects
this concession by respondent.
Section 469 limits a taxpayer's ability to deduct losses
from passive activities. Generally, a taxpayer may deduct losses
from passive activities from income from passive activities only
and may not use such losses to offset income from nonpassive
activities. See sec. 469(a), (d). Passive activity includes any
rental activity. See sec. 469(c)(2).
Section 469(g)(1) provides for an exception to this passive
activity loss disallowance rule: If the taxpayer disposes of his
or her entire interest in any passive activity in a fully taxable
transaction between unrelated parties, any loss from that
activity is not treated as from a passive activity.
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