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for the expenses which were in excess of the total amount of rent
collected, if necessary.
In the notice of deficiency, respondent disallowed $59,918 of
the losses claimed by petitioner with respect to the rental
properties. Although petitioner disputes the disallowance of the
losses, he has made no arguments with respect to this issue, and
at trial he stated that this issue “seems to be a matter of law”.
Section 469 imposes limits on deductions for losses from any
passive activity. Under section 469(a)(1), an individual may not
deduct a passive activity loss, which is defined in section
469(d)(1) to be the excess of the individual’s aggregate losses
from passive activities over his aggregate income from passive
activities. As a general rule, any rental activity is a passive
activity. Sec. 469(c)(2). A rental activity in turn is “any
activity where payments are principally for the use of tangible
property”. Sec. 469(j)(8). Although certain exceptions apply to
this general rule, petitioner does not assert, and the record does
not show, that any such exceptions apply in this case. Thus,
petitioner’s rental activities with respect to the seven
properties are passive activities, and petitioner is not allowed a
deduction for his aggregate losses with respect thereto. Sec.
469(a)(1). Respondent disallowed $59,918 of the claimed deduction
of $62,297 with respect to petitioner’s rental activities; it is
not clear from the record why respondent determined that a portion
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Last modified: May 25, 2011