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bedroom apartment. It also has a laundry room with a coin-
operated washer and dryer. Petitioner performed the majority of
the work on the property in order to minimize expenses. She
would show the apartments, process rental applications, collect
rent, and perform general maintenance work.
Petitioners claimed deductions on their 2001 Federal income
tax return for a rental real estate loss of $68,796 relating to
the Lyon Street property. Respondent determined that this loss
resulted from a passive activity and disallowed it.5 Petitioners
argue that, as a real estate professional, Mrs. Harmon is not
subject to the passive activity loss rules normally applicable to
rental property. We disagree and consequently hold for
respondent.
Discussion
A. Burden of Proof
Taxpayers are permitted deductions only as a matter of
legislative grace, and only as specifically provided by statute.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). In
addition, the Commissioner’s determinations are generally
presumed correct, and the taxpayer bears the burden of proving
those determinations wrong. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933). The burden of proof may, under certain
5 Respondent does not dispute that petitioners have
substantiated the claimed expenses.
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