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activity in either 1996 or 1997. “To make an election, a
taxpayer must clearly notify the Commissioner of the taxpayer’s
intent to do so.” Kosonen v. Commissioner, T.C. Memo. 2000-107.
Although petitioners claim that they provided an election for
1996 to a revenue agent during the examination and filed their
1997 election with their original return, neither election was
produced at trial. For lack of evidence and proof, respondent
is sustained with respect to this issue.4
Because petitioners did not properly elect to treat the
rental properties as a single activity, they cannot group them.
Krukowski v. Commissioner, 279 F.3d 547 (7th Cir. 2002), affg.
114 T.C. 566 (2000); Kosonen v. Commissioner, supra. As an
additional consequence of the failure to elect, Mrs. Jahina must
qualify as a real estate professional with respect to each
property separately in order to avoid a determination that the
rental activities were per se passive under section 469(c)(2).
4 Even if the election had been made part of the record,
its validity would still be in question. Respondent disputes
that petitioners filed a proper election with either their 1996
or 1997 original return. To be valid, the election must be filed
with the original return. Sec. 1.469-9(g)(3), Income Tax Regs.
A taxpayer who aggregated real estate rental activities on his
tax returns but who failed to meet the literal requirements of
electing combination treatment has been held not to have given
clear notice of an intent to elect under sec. 469(c)(7). Kosonen
v. Commissioner, T.C. Memo. 2000-107. Moreover, petitioners did
not argue substantial compliance with the applicable regulation.
Cf. American Air Filter Co. v. Commissioner, 81 T.C. 709, 718-723
(1983).
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