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from the company listed approximately five such expenses, all of
which were reimbursed by petitioners or subtracted from the
rental income.
Petitioner paid the utility and mortgage bills on a monthly
basis, the condominium fee on a quarterly basis, and county taxes
on a yearly basis. During March and/or April of each year, in
preparation for the rental season, petitioner would “de-
winterize” the unit. At this time of year, petitioner would
often need to do repairs, such as ceiling repair, patching, and
painting, and he would normally shampoo the carpets. Around
Thanksgiving each year, petitioner would spend approximately 1
week at the rental unit to prepare it for winter, when the unit
was not actively rented. At this time, petitioner would normally
turn off the water and power, turn down the heat, bring in
outside furniture, and perform “general cleanup”.
Petitioners filed a joint Federal income tax return for each
of the years in issue. They claimed losses on the rental unit of
$14,781 in 1994 and $14,017 in 1996. The 1994 return was filed
on a 1996 form and was signed by petitioners on January 15, 1997.
In the statutory notice of deficiency, respondent disallowed the
above-mentioned losses on the grounds that petitioners “did not
materially participate in the day to day operations” of the
rental property, causing the losses to be nondeductible passive
activity losses.
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Last modified: May 25, 2011