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petitioner spent during 1996 performing personal services in
connection with his rental real estate activity. All other
requirements of the statutory scheme having been satisfied by
petitioner, the number of hours that he spent performing services
in his rental real estate activity is critical because in order
to be entitled to the deduction here in dispute, petitioner must
establish that those hours exceed the hours that he spent
performing personal services as an employee of the Department.
See sec. 469(c)(7)(B)(i).3
Not counting vacation and sick leave, petitioner spent at
least 1,834 hours4 performing personal services as an employee of
the Department. Petitioner’s log indicates that the time he
spent performing personal services in his rental real estate
activity; i.e., 2,440 hours, exceeds the time he spent performing
services as an employee. However, respondent argues that the
time reported in the log is overstated by the hours identified as
“phone-in office hours 360 days a year” (the disputed hours). The
disputed hours consist of time that petitioner was available to
take telephone calls, rather than the number of hours that he was
3 Petitioner does not qualify for a limited deduction for a
loss attributable to rental real estate activity because he did
not live separate and apart from his spouse for all of 1996 and
did not file a joint return for that year with her. See sec.
469(i).
4 We need not decide whether vacation and sick leave hours
should be taken into account in the computation of the hours that
petitioner spent performing personal services as an employee of
the Department.
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Last modified: May 25, 2011