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Car and truck expenses $5,220.16
Depreciation 3,639.50
Insurance 579.10
Meals and entertainment 210.00
Business use of the Falls
Church house 1,410.90
Supplies 98.14
Maintenance 675.23
Loss $11,833.03
Petitioners reported no income on the 1996 Schedule C.
Respondent disallowed the $11,833.03 loss relating to the
Cumberland house.
Discussion
Before we explore petitioners’ argument, as we understand
it, it is helpful to delineate exactly what is at issue here.
Petitioners do not contend that during 1996 the rental activity
of the Cumberland house constituted a trade or business of rental
property under section 162. This is understandable because at
the end of 1995 petitioners had abandoned any rental activity and
were attempting to sell the Cumberland house. There was simply
no nexus between their previous rental activity and the expenses
that were incurred during 1996. Rather, petitioners contend that
they were engaged in a trade or business that, in their own
words, consisted of the “purchase, development, physical
improvement, building construction, maintenance, and sale of real
properties including the necessary planning and management these
activities entailed.”
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Last modified: May 25, 2011