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Respondent determined deficiencies in petitioners' Federal
income taxes of $4,018 for 1999 and $4,130 for 2000. The Court
must decide whether petitioners are entitled to deduct losses on
Schedule E, Supplemental Income and Loss, for either year.
Respondent's adjustments to petitioners' itemized deductions are
computational and will be determined by the Court's resolution of
the Schedule E loss issue.
The stipulated facts and exhibits received into evidence are
incorporated herein by reference. At the time the petition in
this case was filed, petitioners resided in Newark, California.
Background
During the years here involved, petitioner Richard C. Rivera
was employed as an electrician, and petitioner Sharon M. Rivera
was employed as a "personnel technician".
Around 1989 or 1990, petitioners purchased improved real
property in Truckee, California, for about $80,000. As of the
date of trial it was worth between $160,000 and $170,000. In the
early 1990s, after a year or so of ownership, petitioners rented
their property through a vacation property management company
under short-term leases for the winter or for ski season. This
caused a lot of wear and tear on the property, and they had "so
much trouble" from the renters. Petitioners received numerous
complaints there were "extra people living at the property", and
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