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Respondent determined a deficiency of $2,079 in petitioner’s
1996 Federal income tax.2 The issue is whether petitioner’s real
estate rental income constitutes “disqualified income” under
section 32, and, as such, exceeds the 1996 allowable maximum
disqualified income of $2,200 for earned income tax credit
eligibility. Petitioner resided in Danville, Virginia, at the
time the petition was filed.
Background
The applicable facts may be summarized as follows.
Petitioner is a self-employed general contractor for custom-built
single family homes. In 1996, petitioner operated a home
construction business on a full-time basis and a real estate
rental property activity. Petitioner reported a net profit of
$7,260 from the construction business in 1996. Petitioner owns a
condominium and three commercial buildings. Petitioner reported
gross rentals of $25,425 and a net income of $8,095 from his real
estate rental property activity in 1996.
Petitioner personally handled the renting, maintenance, and
collections for the real estate rental property activity. He
employed no agents to assist him in these endeavors, other than
as required for the upkeep of the condominium under the terms of
2 Petitioner filed a joint 1996 Federal income tax return with
his wife. The notice of deficiency was issued to petitioner and
his wife; however, petitioner’s wife did not petition this Court
and is not a party to this proceeding.
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Last modified: May 25, 2011