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Maryland (Port Deposit property). The other was located at 2539
Harbor Lane, Sanibel, Florida (Sanibel property).
The Sanibel property was rented for approximately 1 month
during 1999 and for approximately 3 weeks during 2000. The Port
Deposit property was rented throughout 1999 and 2000. Petitioners
spent no more than 2 weeks per year at the Sanibel property,
performing maintenance work, but also fishing off the pier.
Petitioners filed joint Federal income tax returns for the
1999 and 2000 taxable years. For 1999, petitioners reported on
their Schedule E, Supplemental Income and Loss, a loss of $25,712
from rental real estate for the Port Deposit property and the
Sanibel property. For 2000, petitioners reported a loss on
Schedule E of $29,493 for the same properties.
For each of the taxable years, the Schedule E filed by
petitioners contained the following cautionary language:
“Caution: Your rental real estate loss * * * may be limited.
See page E-3 to find out if you must file Form 8582. Real estate
professionals must complete line 42 on page 2.” Despite this
language, petitioners left blank line 42 of Schedule E, dealing
with “Reconciliation for Real Estate Professionals”. Moreover,
petitioners did not file a Form 8582, Passive Activity Loss
Limitations, with either of their joint returns for 1999 and
2000.
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Last modified: May 25, 2011