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Property 1995 1996
Over the Road Trailers $22,357 $16,489
Warehouse (Stillwater) 600 600
Buy N Bye #7 32,128 34,791
Buy N Bye #6, #12, #13 306,272 330,688
Conoco Cmart #16 52,644 87,868
Office building (Stillwater) (6,838) 20,688
Carwash (Ponca City) -- 21,000
Buy N Bye #2 (24,856) (14,446)
Western Sizzlin’ PC -- (114,811)
Airplane (355,147) (255,096)
Total nonpassive income/(loss) $27,160 $127,771
Petitioner did not attach to his 1995 or 1996 tax return an
election to treat all interests in rental real estate as a single
rental real estate activity.
Notice of Deficiency
Respondent’s examination of petitioner’s tax liability
commenced on May 13, 1997. A statutory notice of deficiency for
1995 and 1996 was mailed to petitioner on December 8, 1999. In
the notice of deficiency, respondent disallowed petitioner’s
losses for 1995 and 1996.
OPINION
Respondent reclassified petitioner’s Schedule E activities
from nonpassive to passive activities and disallowed the losses
claimed by petitioner based on the passive loss limitations under
section 469. In deciding whether petitioner is allowed to deduct
his losses, we must address multiple issues. The deductibility
of the losses from petitioner’s ownership interest in Shaw Ltd.
depends on whether petitioner materially participated in Shaw
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