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her absence, and petitioner’s caretaker did not rent the cottage
on petitioner’s behalf in 2002.
Petitioner testified that during the week that she was in
Lubec in 2002, she rented her cottage to a couple for 1 week for
$500. The couple drove into town and discovered the cottage’s
availability from their inquiries in town. Petitioner did not
sign a lease, claiming that it was not the practice in Lubec to
sign leases for rentals. Petitioner did not maintain a record of
the rental or any business books and records relating to the
rental of the cottage.
Petitioner admits that she has no expertise in real estate
and that she had neither hired nor sought advice from a real
estate professional prior to purchasing the cottage. Petitioner
has never earned a profit in the rental real estate activity, and
her expenses far exceeded income in 2002 as well as in the years
prior to and subsequent to that year. There is also little
expectation that the cottage will appreciate in value because
Lubec is an isolated and economically depressed town.
Elements of personal pleasure or recreation may signal the
absence of a profit objective. Sec. 1.183-2(b)(9), Income Tax
Regs. Petitioner described the cottage on lot No. 126 as
“beautiful” and her “pride and joy”, and she clearly enjoyed and
obtained pleasure from being in Lubec and having the cottage
available for use by donors and colleagues. This, together with
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