Robert P. Sweet and Dawnielle K. Lawson - Page 15

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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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