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The first issue is whether the passive loss rules under
section 469 preclude petitioners from deducting real estate
rental losses in the amounts of $128,168 for 1996 and $95,553 for
1997. The specific issue is whether Mrs. Jahina qualifies as a
real estate professional under section 469(c)(7).3
Petitioners contend that they are entitled to deduct their
losses from their real estate rental properties because Mrs.
Jahina was a real estate professional under section 469(c)(7),
and that petitioners’ rental properties were a trade or business
in which they materially participated. Respondent maintains that
the real estate rental activities generating the net losses were
per se passive activities under section 469(c)(2) because Mrs.
Jahina did not establish that she was a real estate professional
pursuant to section 469(c)(7). Respondent further maintains that
petitioners did not elect to treat the rental properties as one
activity under section 469(c)(7)(A), and, therefore, Mrs. Jahina
must qualify as a real estate professional with respect to each
3 Sec. 7491, in certain instances, places the burden of
proof on respondent with respect to examinations of returns
commencing after July 22, 1998. There is no evidence in the
record regarding the date the examination of petitioners’ returns
commenced. Moreover, petitioners do not contend that the
examination of their return commenced after July 22, 1998, or
that sec. 7491 is applicable in this case. Even if sec. 7491 is
applicable, the Court decides this case without regard to the
burden of proof.
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