- 7 - application of subsection (e)).” Subsection (e) requires a taxpayer who uses the dwelling unit for personal purposes during the taxable year, as a residence or otherwise, to limit his deductions. In petitioners’ case this limitation does not affect their deductions because the dwelling unit was rented for 100 percent of the time it was used. See Dinsmore v. Commissioner, T.C. Memo. 1994-134, affd. in part and remanded on other issues 78 F.3d 592 (9th Cir. 1996). Section 280A(c)(5), however, limits the deduction of expenses incurred in the rental use of a residence that may be allowed under section 280A(c)(3) to an amount not in excess of the gross income derived from the rental use for the taxable year over the sum of: (1) The deductions allocable to the rental use that are otherwise allowable regardless of such rental use (such as mortgage interest and real estate taxes); plus (2) any deductions that are allocable to the rental activity in which the rental use of the residence occurs, but that are not allocable to the rental use of the residence itself. Thus, a taxpayer may not normally offset against unrelated income a net rental loss incurred from, and attributable to, the rental use of the taxpayer’s residence. Feldman v. Commissioner, 84 T.C. 1, 5 (1985), affd. 791 F.2d 781 (9th Cir. 1986). Petitioners contend that their rental of the third floor units is not subject to the limitation of section 280A(c)(5).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011