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This is a fully stipulated case that was submitted without a
trial under Rule 122. We incorporate in this opinion the
parties’ stipulation of facts and the exhibits. Petitioners, who
resided in West New York, New Jersey, when they petitioned the
Court, filed joint Federal income tax returns for 1994 and 1995.
All references to petitioner are to Antonio Pungot.
Background
During the years in issue, petitioner worked full time as a
mechanical engineer for E.A. Sears Burrwood PLLC and LKU Group
Inc., engineering consulting firms specializing in real estate
development. He also spent time; i.e., 990 hours in 1994 and
1,552 hours in 1995, performing on–site maintenance at two
residential rental properties that he and his wife owned.
Petitioners, whose modified adjusted gross income exceeded
$100,000, see sec. 469(i)(3)(E), deducted $27,958 and $38,759 for
losses relating to the rental activity on their 1994 and 1995
Federal income tax returns, respectively. In the statutory
notice, respondent overstated the amount of losses petitioners
reported on Schedules E, Supplemental Income and Loss; respon-
dent, who concedes that the notice is incorrect, now disallows
$15,866 and $38,381 of petitioners’ claimed losses. Petitioners
concede that, absent a ruling in their favor on the constitu-
tional issue, respondent’s recomputed deficiencies of $4,125 for
1994 and $10,583 for 1995 are correct.
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