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Further, although the timing of their attempt was incorrect,
petitioners attempted to elect combination treatment. Had
petitioners effected a valid election, the law would not have
required a property-by-property analysis. While the Court makes
no express finding on whether petitioners would have prevailed
had they made a valid election to combine the properties, the
standard would have been significantly less burdensome had they
done so. Finally, the record shows that Mrs. Jahina left her
wage job in 2000 to devote her full-time efforts to their rental
properties. This record indicates reasonable cause and good
faith with respect to the underpayment. The Court holds that
petitioners did not act negligently with respect to the
underpayment and are not liable for the accuracy-related penalty
under section 6662(a). See Shaw v. Commissioner, T.C. Memo.
2002-35 (taxpayer, a “sophisticated businessperson”, was not
liable for section 6662(a) penalty notwithstanding Court’s
holding that he was not a real estate professional).
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent on the deficiencies
and for petitioners on the section
6662(a) penalty.
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Last modified: May 25, 2011