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exceeds $100,000. Sec. 469(i)(3). For this purpose, the
taxpayer’s adjusted gross income is determined without regard to
any passive activity loss. Sec. 469(i)(3)(F)(iv).
Respondent agrees that petitioner actively participated in
rental real estate activities and that petitioners are entitled
to the $25,000 exemption, subject to the phaseout provision. On
their 2001 tax return, petitioners reported $135,627 in wages,
$498 in taxable interest, $793 in taxable refunds or credits, and
$611 in unemployment compensation for an adjusted gross income
(without the passive activity loss) of $137,529. Petitioners’
adjusted gross income exceeds $100,000 by $37,529. Fifty percent
of $37,529 is $18,764 (rounded). Petitioners’ maximum offset
amount of $25,000 is reduced by $18,765 to $6,236. Thus, we find
that petitioners are entitled to rental real estate losses of
$6,236 under section 469(i), as determined by respondent in the
notice of deficiency.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered for
respondent.
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Last modified: May 25, 2011