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loss” claimed on the Schedule E because the Pepper Pike residence
had not been “converted from personal use to use as an income-
producing property”; (2) disallowed the medical expense
deduction; and (3) determined that the underpayment of tax
required to be shown on petitioner’s return is due to negligence
and imposed a section 6662 accuracy-related penalty. Other
adjustments made in the notice of deficiency are not in dispute.
Discussion
1. “Rental real estate loss” Claimed on Schedule E
Normally, no deduction is allowed for the expenses incurred
in maintaining a personal residence. Sec. 262(a); sec. 1.262-
1(b)(3), Income Tax Regs. Similarly, any loss incurred in the
sale of a personal residence is generally considered personal in
nature and cannot be deducted. Sec. 1.262-1(b)(4), Income Tax
Regs. However, an individual is entitled to deduct all the
ordinary and necessary expenses paid or incurred during the
taxable year “for the management, conservation, or maintenance of
property held for the production of income”. Sec. 212(2).
According to petitioner, by holding the Pepper Pike
residence for rent and temporarily renting it for a portion of
1991 and 1992, the property was converted from property used for
personal purposes to “property held for the production of income”
during the years in issue. Respondent disagrees, and so do we.
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