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The foregoing statements are tantamount to an admission
that, regardless of the amount of (1) dividends, interest and/or
capital gains attributable to his Merrill Lynch account and/or
other sources and (2) profits from his law practice (for which
petitioner did report a small profit for 1987), petitioner always
anticipated that losses generated by his rental activities would
be sufficient to offset such income, thereby resulting in no tax
liability to petitioner. Moreover, for the audit year, the
reported expenses attributable to petitioner’s rental properties
were almost 250 percent greater than the reported rental income.
That disparity between expense and income further supports the
conclusion that petitioner operated his rental properties without
a good faith objective of generating a profit. Therefore, we
reject petitioner’s claim, raised at trial, to Schedule E losses.
V. The Dependency Exemptions
Section 151(a) and (c)(1) allows deductions for exemptions
for dependents. In order to be entitled to dependency exemptions
for three of his children, petitioner must show that each child
meets the statutory definition of “dependent”, which, under
section 152(a)(1), includes a son or daughter over half of whose
support, for the taxable year, is provided by the taxpayer.
Under section 151(c)(1)(B), each child must be either under 19
years of age or a student under 24 years of age, at yearend.
Petitioner offered no evidence that the foregoing statutory
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