Williams v. Commissioner of Internal Revenue, 081313 FEDTAX, 23497-11S

Docket Nº:23497-11S, 23498-11S
Opinion Judge:HAINES, Judge.
Party Name:TRAVIS L. WILLIAMS AND EDDIE J. WILLIAMS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Travis L. Williams and Eddie J. Williams, pro sese. Shannon Edelstone, for respondent.
Case Date:August 13, 2013
Court:United States Tax Court
 
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T.C. Summary Opinion 2013-63

TRAVIS L. WILLIAMS AND EDDIE J. WILLIAMS, Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Nos. 23497-11S, 23498-11S

United States Tax Court

August 13, 2013

NOT PRECEDENTIAL

Travis L. Williams and Eddie J. Williams, pro sese.

Shannon Edelstone, for respondent.

SUMMARY OPINION

HAINES, Judge.

These consolidated cases were heard pursuant to section 7463 of the Internal Revenue Code in effect when the petitions were filed.1 Pursuant to section 7463(b), the decisions to be entered are not reviewable by any other court, and this opinion shall not be treated as precedent for any other case.

Respondent determined deficiencies in petitioners' Federal income tax for 2007 and 2008 (years at issue) of $8, 067 and $28, 886, 2 respectively, and accuracy-related penalties under section 6662(a) of $1, 613 and $5, 777, respectively. After concessions, 3 the issues for decision are whether petitioners are entitled to deduct certain losses from their rental real estate activity for the years at issue and whether petitioners are liable for accuracy-related penalties.

Background

Some of the facts have been stipulated and are so found. Those exhibits attached to the stipulations which were found admissible are incorporated by this reference. Petitioners resided in California when the petition was filed.

In 2007 and 2008 Mr. Williams worked as a real estate appraiser, and Mrs. Williams worked full time as a supervisor at a technology company. Mr. and Mrs. Williams together owned 10 real properties, including 9 rental properties (rental properties) during the years at issue. Several of the rental properties were in Arizona and Nevada, and petitioners used a management company to provide certain services for the rental properties. Petitioners elected to treat the rental properties as a single activity (rental property activity) under section 469(c)(7)(A) and section 1.469-9, Income Tax Regs., for the years at issue.

Petitioners timely filed joint Federal income tax returns for the years at issue. On their 2007 return petitioners claimed a rental real estate loss deduction of $40, 698, and on their 2008 return they claimed a rental real estate loss deduction of $236, 145. Petitioners' adjusted gross income without the claimed rental real estate losses exceeded $150, 000 for each year at issue. Respondent issued a notice of deficiency disallowing the claimed rental real estate loss deductions.4 Petitioners timely filed a petition with this Court challenging the determinations.

Discussion

I. Burden of Proof

Generally, the Commissioner's determination of a deficiency is presumed correct, and the taxpayer bears the burden of proving it incorrect. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover, deductions are a matter of legislative grace, and the taxpayer bears the burden of proving his entitlement to any deductions claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

II. Passive Activity Losses

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