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days per customer during 1996 and 1997, respectively. In 1996,
petitioner supervised the repairmen and contractors, made
selections and supervised interior design work, purchased
household furnishings and supplies, and cleaned the property.
Petitioner summarized her activities for 1997 as “re-rented,
cleaned, gardening, showed property to prospective renters,
inspected repairmen’s work” and “started process to sell by
holding open houses”. In 1996, petitioner made 10 visits to the
Lake Arrowhead property, 9 of which were in conjunction with
matters relating to her law practice. In 1997, petitioner made
three visits to the Lake Arrowhead property, two of which were in
conjunction with matters relating to her law practice.
Petitioner had a commission agreement with Mountain Country
Realty, Inc. (Mountain Country), to handle the rental of the Lake
Arrowhead property during 1996 and 1997. Mountain Country
located renters and showed the property to prospective renters.
Mountain Country collected the rent payments, paid itself the
agreed commission, reimbursed itself for expenses and repairs
related to the rental property, and issued a check for the
remaining amount to petitioners. Mountain Country handled the
repairs related to the Lake Arrowhead property. Petitioners
deducted the commission expenses paid to Mountain Country in the
amounts of $2,471 and $1,881 in 1996 and 1997, respectively, on
Schedule E of their joint income tax return.
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