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business transactions. The Supreme Court has observed that
“while a taxpayer is free to organize his affairs as he chooses,
nevertheless, once having done so, he must accept the tax
consequences of his choice, whether contemplated or not and may
not enjoy the benefit of some other route he might have chosen to
follow but did not.” Commissioner v. Natl. Alfalfa Dehydrating &
Milling Co., 417 U.S. 134, 148-149 (1974) (citations omitted).
We sustain respondent’s determination that the net rental
income from the real estate properties rented to Shaw’s Gulf and
C&A Trucking should be reclassified as nonpassive income.
Petitioner argues, in the alternative, that his real estate
activities were nonpassive activities because he qualifies as a
real estate professional under section 469(c)(7) and his real
estate rental activities are a trade or business in which he
materially participated.
Respondent disallowed the following real estate rental
losses based on the passive loss limitations under section 469:
Property 1995 1996
Buy N Bye #2 $24,856 $14,446
Office building (Stillwater) 6,838 -–
Western Sizzlin’ PC –- 114,811
Total passive losses $31,694 $129,257
Respondent maintains that the real estate rental activities
generating a net loss are per se passive activities under section
469(c)(2) because petitioner has not presented adequate evidence
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