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the rental income and expenses as a single activity on Schedule E
constitutes “a significant revelation to the Commissioner that
that’s how the taxpayer [petitioner] was electing to act” to
treat his rental properties as a single activity. We disagree.
In Kosonen v. Commissioner, T.C. Memo. 2000-107, the
taxpayer aggregated his rental income and expenses in one column
on the Schedules E attached to his 1994, 1995, and 1996 returns.
Similar to the petitioners in the instant case, the taxpayer in
Kosonen argued that aggregating his rental activity losses on his
returns showed that he had elected to treat his rental real
estate activities as a single activity under section 469(c)(7).
The Court held, however, that the fact that the taxpayer
aggregated his losses was not clear notice that he intended to
elect under section 469(c)(7).7 The Court reasoned that a
taxpayer must clearly notify the Commissioner of the taxpayer’s
intent to make an election. Kosonen v. Commissioner, supra
(citing Knight-Ridder Newspapers Inc. v. United States, 743 F.2d
6(...continued)
in the treatment of his or her real property trades or
businesses. This section, however, is not determinative of the
issue in dispute.
7 The Court expressly noted that the instructions for the
1994 Form 1040, U.S. Individual Income Tax Return, and Schedule
E, Supplemental Income and Loss, required the taxpayer to
aggregate his rental real estate losses; thus, the fact that the
taxpayer had done so was not clear notice that he intended to
make the election under sec. 469(c)(7). See Kosonen v.
Commissioner, T.C. Memo. 2000-107.
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