PURSUANT TO INTERNAL REVENUE CODE
SECTION 7463(b),THIS OPINION MAY NOT
BE TREATED AS PRECEDENT FOR ANY
T.C. Summary Opinion 2006-57
UNITED STATES TAX COURT
EDWARD C. AND SUSAN R. HANNA, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19033-03S.
Filed April 19, 2006.
Edward C. and Susan R. Hanna, pro sese.
Lauren B. Epstein, for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7463 of the Internal
Revenue Code in effect at the time the petition was filed. The
decision to be entered is not reviewable by any other court, and
this opinion should not be cited as authority. Unless otherwise
indicated, subsequent section references are to the Internal
Revenue Code in effect for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
- 2 -
Respondent determined a $26,693 deficiency in petitioners’
2000 Federal income tax and a $5,338.60 penalty pursuant to
section 6662(a). The issues for decision are: (1) Whether the
passive activity rules of section 469 preclude petitioners from
deducting losses from their rental real estate activities in the
taxable year 2000, and (2) whether petitioners are liable under
section 6662(a) for an accuracy-related penalty.
Some of the facts have been stipulated, and they are so
found. The stipulation of facts, supplemental stipulation of
facts, and attached exhibits, as well as additional exhibits
admitted during trial, are incorporated herein by this reference.
Petitioners Susan Hanna (Mrs. Hanna) and Edward Hanna (Mr. Hanna)
are married and resided in Sanibel, Florida, when they filed
their petition. For convenience, we combine our findings and
Sanibel is a popular vacation spot located on an island off
the west coast of Florida. In 1999, petitioners purchased two
houses in Sanibel and began renting them to vacationers. In
2000, petitioners rented t