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depreciation taken on the equipment, and he derived no personal
pleasure or recreation from using the equipment. We also find
petitioner’s testimony as to his intent to profit from the
equipment leasing activity credible, thorough, and persuasive.
Further, respondent argues that petitioner could not profit
on the amount he charged in rent, yet presented no evidence
regarding prevailing market rental rates for similar equipment.
Respondent also argues that petitioner should have sold the
equipment for fair market value rather than book value, but has
presented no evidence regarding the fair market value of the
equipment, particularly for computer equipment that may lose
value rapidly. Consequently, respondent has not met his burden
to show that petitioner did not engage in the equipment leasing
activity with the primary purpose to earn a profit. Commissioner
v. Groetzinger, 480 U.S. at 35; Wolf v. Commissioner, 4 F.3d 709,
713 (9th Cir. 1993), affg. T.C. Memo. 1991-212; Warden v.
Commissioner, T.C. Memo. 1995-176, affd. without published
opinion 111 F.3d 139 (9th Cir. 1997).
II. Whether the Passive Loss Rules Preclude Petitioner From
Deducting His Losses
Respondent also argues that, if section 183 does not deny
petitioner the loss deduction, then the loss deduction should be
disallowed pursuant to the passive activity loss limitations.
See sec. 469. Petitioner concedes that he has the burden of
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