Bruce and Judy Bailey - Page 20

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          arrangements, cleaning between tenants, and routine repairs and             
               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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