Tony R. Carlos and Judith D. Carlos - Page 2

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               income from the calculation of passive loss for a sec.                 
               469, I.R.C. activity, despite the proper grouping of                   
               such income with an item of passive loss against which                 
               such income would otherwise be offset.                                 


               Murray H. Falk, for petitioners.                                       
               Paul L. Dixon, for respondent.                                         


                                       OPINION                                        

               WELLS, Judge:  Respondent determined deficiencies in                   
          petitioners’ Federal income taxes for 1999 and 2000 as follows:1            
                           Year              Deficiency                               
                           1999              $17,011                                  
                           2000                114,443                                
               1Although respondent initially determined corresponding                
          deficiencies of $17,011 and $16,384 for 1999 and 2000,                      
          respectively, the parties have stipulated that the deficiency               
          determined by respondent for 2000 is $14,443.                               
               The issue to be decided is whether losses from petitioners’            
          rental activity constitute passive activity losses pursuant to              
          section 469.2                                                               





               1Although respondent initially determined sec. 6662(a)                 
          accuracy-related penalties of $3,402.20 for 1999 and $3,276.80              
          for 2000, respondent concedes that penalties are inapplicable.              
               2All section references are to the Internal Revenue Code, as           
          amended, and all Rule references are to the Tax Court Rules of              
          Practice and Procedure.                                                     




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