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The Court finds from the entire record that petitioners'
condominium activity is not described in section 1.469-
1T(e)(3)(ii), Temporary Income Tax Regs., 53 Fed. Reg. 5702 (Feb.
25, 1988). Petitioners' condominium activity during 2000 was a
rental activity, a passive activity, and respondent's denial of
the deduction of passive activity losses is sustained.
Accordingly, the Court sustains respondent's determination
that there is a deficiency in petitioners' income tax for the
year.
Accuracy-Related Penalty
Respondent determined that petitioners are liable for the
section 6662(a) accuracy-related penalty. Taxpayers are liable
for an accuracy-related penalty in the amount of 20 percent of
the portion of an underpayment of tax attributable to any
substantial understatement of income tax. Sec. 6662(a) and
(b)(2). A "substantial understatement" is an understatement for
the taxable year exceeding the greater of 10 percent of the
proper tax or $5,000. Sec. 6662(d)(1)(A). No penalty will be
imposed with respect to any portion of any underpayment if it is
shown that there was a reasonable cause for such portion and that
the taxpayer acted in good faith with respect to such portion.
Sec. 6664(c). This determination is based on all the facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
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