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lease on petitioners’ former residence was ancillary to
petitioners’ efforts to sell the property as a result of
petitioners’ relocating to another area); Hudson v. Commissioner,
T.C. Memo. 1981-175 (holding that a rental property was no longer
considered as held out for rent in 1976 where taxpayer’s last
tenant moved out in September 1974).
Considering all of the facts and circumstances, we find that
the Pepper Pike residence was not converted to “property held for
the production of income” merely because it was rented on a
temporary basis during years prior to 1993 and 1994. See Grant
v. Commissioner, supra at 825-826 (rejecting taxpayer’s argument
that he was entitled to expenses under section 212 where he did
not claim the expenses until after his former residence was no
longer being rented and was only being held for sale).
Consequently, petitioner is not entitled to the deductions
claimed on the Schedule E for each of those years, and
respondent’s determinations in this regard are sustained.2
2 On each Schedule E, petitioner reports a “Deductible
rental real estate loss”, a concept that contemplates the
limitations on passive activity losses provided in sec. 469.
Except for a glancing reference in respondent’s trial memorandum,
neither party addressed the application of that section to the
deductions here in dispute. Even if the Pepper Pike residence
was considered “property held for the production of income”
because it was rented or held for rent, then it appears that any
loss attributable to that rental activity, a passive activity for
purposes of sec. 469, would be denied because petitioner did not
file a joint return with his spouse for either year. Sec.
469(i)(5)(B).
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