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activity for mortgage interest in each year, no deductions were
allowed for “other interest.” The Schedule E rental income and
expense deductions set forth in the notice of deficiency were as
follows:
1994 1995
Income $32,019 $81,603
Expenses
Advertising $300 $117
Car & truck 2,085 5,204
Cleaning & maintenance 26 -0-
Legal & professional159 -0-
Mortgage interest 8,087 13,885
Repairs & maintenance10,729 10,066
Supplies 592 -0-
Taxes & licenses 582 1,885
Utilities 1,404 4,139
Lot rent 5,770 15,715
Wages -0- 2,583
Insurance 1,179 3,721
Depreciation 1,323 6,701
Other 214 -0-
Total 32,450 64,016
Sch. E rental income (loss)(431) 17,587
We accept petitioner’s testimony concerning the existence
and nature of the $60,000 loan, corroborated by the above
detailed payments and respondent’s determination that petitioners
were conducting a rental activity in 1994 and 1995. We hold that
petitioners are entitled to rental expense deductions for
interest payments of $4,500 in 1994 and $5,000 in 1995.
We briefly note that respondent has not argued that
petitioner’s rental activity was either passive or related to
property held for investment. See sec. 163(d); sec. 469.
Nothing in the record indicates that the additional deductions
allowed by our holding in this case are limited under either
section 163(d) or section 469, and we so hold.
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