- 20 - arrangements, cleaning between tenants, and routine repairs and maintenance). We conclude that petitioners did not materially participate in the operation of the Lake Arrowhead property during 1996 and 1997, and, accordingly, petitioners’ trade or business relating to the Lake Arrowhead property is a passive activity under section 469(c)(1). The losses incurred with respect to the Lake Arrowhead property are subject to the passive loss limitations imposed by section 469 and are disallowed in 1996 and 1997. Notice of Deficiency Petitioners argue in their reply brief that the notice of deficiency failed to set forth the reasons for respondent’s determinations with sufficient specificity to satisfy the requirements of section 7522. Section 7522(a) requires that a notice of deficiency “describe the basis” for the tax deficiency. However, an “inadequate description under the preceding sentence shall not invalidate such notice.” Sec. 7522(a). Here, the notice of deficiency listed “Rental loss” as an adjustment and disallowed the entire amount of the rental losses claimed by petitioners in 1996 and 1997. The notice of deficiency sufficiently apprised petitioners of the basis for respondent’s deficiency determination. At trial and in respondent’s briefs, respondent provided a consistent explanation for the disallowance of the rental losses. Respondent has takenPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011