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property as the taxpayer’s residence 12 feet away was part of the
taxpayer’s “dwelling unit”. See Scott v. Commissioner, 84 T.C.
683 (1985). Further, the term “dwelling unit” is defined as a
house and all structures or other property appurtenant to the
house. Sec. 280A(f)(1). An attached garage is clearly
appurtenant to the house.
Petitioners argue that because they never used the workshop
as a garage or as a personal space, the analysis should be
different. We disagree, and respondent’s determination as to
this issue is sustained.
3. The South Dakota Workshop
Respondent initially denied a loss on the sale of the South
Dakota workshop on the basis that it was part of the residence
and thus the loss was personal in nature. Generally, no
deduction is allowed on a loss incurred by a taxpayer with
respect to the sale of his principal residence. See sec. 165(c);
sec. 1.165-9(a), Income Tax Regs. Respondent has since modified
his position, and the parties now agree that the workshop was
used for a business or income-producing purpose. The crux of the
remaining disagreement is how to calculate any gain or loss on
the portion of the South Dakota property specifically
attributable to the workshop. See sec. 1.165-9(b), Income Tax
Regs. In particular, the parties disagree on how to apportion
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Last modified: March 27, 2008