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category of expenses as well as in the “Rents” (line 16)
category.
During 1987, petitioner received rental income. He
deposited checks received from rentals in an account at Albank.
On Schedule E, Supplemental Income Schedule, of his 1987 return,
petitioner reported $16,800 in rents received, $23,080 of
expenses other than depreciation, depreciation of $11,875, and a
net loss of $18,155 related to the Lincoln Avenue II property.
He did not report any rents or expenses related to the Lincoln
Avenue I property on that return.
On Schedule E of his 1988 return, petitioner reported rents
received of $10,430, other expenses other than depreciation of
$19,410, depreciation of $10,744, and a net loss of $19,724
related to the Lincoln Avenue II property; he reported no rental
activity related to the Lincoln Avenue I property.
During the audit of petitioner’s 1988 return, petitioner
told the revenue agent conducting the audit that the $41,127
deducted by IL NA Tours and the $12,425 deducted by Air America
for rents, in total $53,552, constituted rents they had paid him
for use of space in the Lincoln Avenue I property. The revenue
agent included $43,123 of unreported rental income relating to
the Lincoln Avenue I property in petitioner’s income for purposes
of determining the deficiency for 1988. The revenue agent
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