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Petitioner was on both sides of the transaction and reported
the income and expense of the airplane lease activity as a rental
activity on his Schedule E. Petitioner chose to structure and
report his airplane leasing activity as a rental activity during
the years in issue and must accept the tax consequences related
to that form. See Commissioner v. Natl. Alfalfa Dehydrating &
Milling Co., 417 U.S. 134, 148-149 (1974). He cannot belatedly
recharacterize it to secure greater tax benefits. Id. We
conclude that the airplane lease activity was a passive activity,
and the rental losses are limited to the extent of passive
activity income under section 469.
Penalties
Section 6662(a) imposes a 20-percent accuracy-related
penalty where the taxpayer’s underpayment of tax is attributable
to negligence or disregard of rules or regulations. See also
sec. 6662(b).
Respondent determined that petitioner is liable for the
accuracy-related penalty under section 6662(a) because petitioner
was negligent in the preparation of his 1995 and 1996 tax
returns. Respondent maintains that petitioner’s tax returns
contained errors, petitioner failed to maintain adequate books
and records, and petitioner ignored the self-rental rules of
section 1.469-2(f)(6), Income Tax Regs. Petitioner argues that
he was not negligent, that he made a reasonable attempt to comply
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