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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 taken
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