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partnership that Kai and Ulysses ran together and which owned a
house and two small apartment buildings. In 1999 and 2000, Lee
Brothers Investments and the brothers’ other real estate
investments ran up big, albeit noncash, losses. The Commissioner
argues that these losses were passive, and so may not be used by
the Lees to offset their other income.
FINDINGS OF FACT
The Lee brothers were born in China, and moved to Honolulu
in 1961. Both later moved to the mainland (they were California
residents when they filed their petitions) and started families
of their own. The Lees are well educated: Ulysses earned a
bachelor’s degree in accounting and a master’s in business
administration. Kai earned bachelor’s and master’s degrees in
nuclear engineering, and another master’s degree and a doctorate
in medical physics.
During 1999 and 2000, Kai worked full time as a professor of
radiology under a joint appointment at the University of Southern
California and the Los Angeles County Medical Center. Kai also
co-owned and operated (beginning in 2000) 101 Positron Emission
Tomography Management Services LLC, a medical diagnostic
facility; Kai Lee, Ph.D., Inc., a consulting service; and
invested in a few real estate ventures with members of his
family. Ulysses Lee was a full-time examiner at the IRS, and he
also invested in real estate.
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Last modified: May 25, 2011