                  T.C. Memo. 2010-85



                UNITED STATES TAX COURT



         CHARLES M. AKERS, JR., Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 16391-08.            April 21, 2010.



     R determined a deficiency in P’s 2004 Federal
income tax. After P’s concessions, the issues for
decision are: (1) Whether P is entitled to deduct
Schedule E expenses relating to real property in
California; and (2) whether the real property in
California was a residence of P during 2004 for
purposes of sec. 280A, I.R.C.

     Held: P is not entitled to deduct Schedule E
expenses relating to the real property in California.

     Held: The real property in California was a residence
of P during 2004 for purposes of sec. 280A, I.R.C. P is
liable for the income tax deficiency.
                               - 2 -

     Charles M. Akers, Jr., pro se.

     Jeffery D. Rice, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:   This case is before the Court on a petition

for redetermination of an alleged income tax deficiency that

respondent determined for petitioner’s 2004 tax year.   After

concessions by petitioner,1 the issues for decision are:   (1)

Whether petitioner is entitled to a deduction for expenses

claimed on Schedule E, Supplemental Income and Loss, for 2004

relating to petitioner’s real property in California; (2) if

petitioner is not entitled to deduct Schedule E expenses for the

2004 tax year, whether the real property in California is a

residence of petitioner for 2004 for purposes of section 280A.2

                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts and accompanying exhibits are hereby incorporated by




     1
      Petitioner conceded that he received $673 of unreported
income in 2004. This amount included income from compensation
and the sale of stocks and bonds. There was also an unreported
withholding tax credit of $104 which respondent conceded.
     2
      Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended and in effect for
the tax year at issue. The Rule reference is to the Tax Court
Rules of Practice and Procedure.
                                - 3 -

reference into our findings.    At the time he filed his petition,

petitioner resided in California.

     During the 2004 tax year petitioner was the sole owner of a

three-bedroom home in California (the cabin).    On his 2004

Federal income tax return, petitioner claimed $20,258 of Schedule

E expenses relating to the rental of the cabin.    All of these

claimed expenses were disallowed by respondent.

     Petitioner contracted with Alpine Resort Rentals (Alpine), a

property management company, to rent the cabin for the 2004 tax

year.   Per the rental agreement, Alpine had an exclusive right to

rent the cabin during 2004.    For its services, petitioner paid

Alpine a 35 percent commission of all rental income received.

Among other things, Alpine was responsible for arranging

housekeeping and linens for rental customers; petitioner was

responsible for maintaining the property in a safe and aesthetic

condition, paying all utilities, having the property “deep

cleaned” twice a year, and providing linens.

     The cabin was rented 3 times during the 2004 tax year, for a

total rental period of 12 days and 9 nights.    The parties have

agreed that the average rental period of customer use for the

cabin for 2004 tax year was 3 days.

     Petitioner visited the cabin eight times during 2004, for a

total of approximately 27 days and 19 nights.    Each time
                                - 4 -

petitioner visited the cabin during 2004, he was accompanied by

family members.

     On April 14, 2008, respondent issued a notice of deficiency

disallowing the previously noted $20,258 of petitioner’s claimed

Schedule E expenses.    Petitioner filed a timely petition with

this Court.   A trial was held on January 18, 2009, in Los

Angeles, California.3

                               OPINION

I.   Burden of Proof

     The Commissioner’s determination of a taxpayer’s liability

is generally presumed correct, and the taxpayer bears the burden

of proving that the determination is improper.    See Rule 142(a);


     3
      It is appropriate at this juncture to dispose of a
procedural matter pending before this Court. In the stipulation
of facts and the supplemental stipulation of facts, respondent
objected to the admissibility of petitioner’s Exhibits 9-P
through 22-P on grounds of relevancy and materiality. We took
respondent’s objections under advisement. Upon due consideration
we find that Exhibits 9-P through 11-P and 14-P through 22-P have
a tendency to make the existence of facts that are of consequence
to the determination of this case more or less likely than
without them. See Fed. R. Evid. 401 and 402. Therefore,
respondent’s objections to the admissibility of petitioner’s
Exhibits 9-P through 11-P and 14-P through 22-P are overruled and
these exhibits are received into evidence.
With regard to Exhibit 12-P, a copy of the letter petitioner
wrote to his Congressman regarding his case, and Exhibit 13-P, a
copy of the letter petitioner received from the director of
constituent services for Representative Edward R. Royce in
response to petitioner’s letter, we find that these exhibits are
not relevant to the case at hand and not admissible into
evidence. Therefore, respondent’s objections to the
admissibility of petitioner’s Exhibits 12-P and 13-P are
sustained and these exhibits are not received into evidence.
                               - 5 -

Welch v. Helvering, 290 U.S. 111, 115 (1933).     However, pursuant

to section 7491(a), the burden of proof on factual issues that

affect the taxpayer’s tax liability may be shifted to the

Commissioner where the “taxpayer introduces credible evidence

with respect to * * * such issue.”     Petitioner has not

established that he meets the requirements under section

7491(a)(1) and (2) for such a shift.     Consequently, the burden of

proof remains on him.   Moreover, deductions are a matter of

legislative grace, and petitioner bears the burden of proving

that he is entitled to any of the deductions claimed.       See

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

II.   Section 469 Schedule E Expenses Relating to Rental of Cabin

      Section 469(a)(1) and (d)(1) generally prohibits a taxpayer

from claiming deductions attributable to “passive activities” in

an amount which exceeds the income generated by that taxpayer’s

“passive activities”.   Madler v. Commissioner, T.C. Memo. 1998-

112; Scheiner v. Commissioner, T.C. Memo. 1996-554; Mordkin v.

Commissioner, T.C. Memo. 1996-187.     Section 469(c)(1) and (2)

provides that the term “passive activity” includes:     (1) Any

activity which involves the conduct of a trade or business and in

which the taxpayer does not materially participate, and (2)

except for taxpayers engaged in the real property business, any

rental activity without regard to whether or not the taxpayer

materially participates in the activity.
                               - 6 -

     For purposes of section 469, the term “rental activity” is

defined in section 469(j)(8) as any activity where payments are

principally for the use of tangible property.   See also sec.

1.469-1T(e)(3)(i), Temporary Income Tax Regs., 53 Fed. Reg. 5702

(Feb. 25, 1988).   An activity involving the use of tangible

property, however, is not considered a rental activity for a

taxable year if for such taxable year the average period of

customer use for such property is 7 days or less.    Sec.

1.469-1T(e)(3)(i) and (ii)(A), Temporary Income Tax Regs., supra.

Therefore, owners of rental real estate are not considered to be

engaged in a rental activity if the average period of customer

use is 7 days or less.   Madler v. Commissioner, supra.

     Section 469(i)(1) and (2) allows the taxpayer to offset from

nonpassive income up to $25,000 of certain passive activity

losses,4 as long as the activity is considered a “rental

activity”.

     The parties have stipulated that the average period of

customer use for the cabin during 2004 was 3 days.    Consequently,

petitioner’s rental activity of the cabin during the 2004 tax

year is not a “rental activity” as defined in section 469(j)(8)

and the regulations thereunder and thus he is not allowed the




     4
       The deduction is phased out for income levels above
$100,000. Sec. 469(i)(3).
                               - 7 -

$25,000 offset for losses against nonpassive income.    See sec.

1.469-1T(e)(3)(i) and (ii)(A), Temporary Income Tax Regs., supra.

     Additionally, since the rental of the cabin does not fall

within the definition of “rental activity” under section 469,

Passive Activity Losses and Credits Limited, it is not a per se

passive activity under section 469(c)(2).    Therefore, if

petitioner can show that he “materially [participated]” in the

rental of the cabin, the activity would not be considered passive

and he could claim his losses against nonpassive income.     Sec.

469(c)(1)(B).

     Material participation is defined as involvement in the

operations of an activity on a regular, continuous, and

substantial basis.   Sec. 469(h)(1).   A taxpayer can establish

material participation by satisfying any one of the seven tests

provided in the regulations.   Sec. 1.469-5T(a), Temporary Income

Tax Regs., 53 Fed. Reg. 5725-5726 (Feb. 25, 1988); see also

Mordkin v. Commissioner, supra.   We consider that for purposes of

the case before us, the pertinent tests, as stated in section

1.469-5T(a)(2) and (3), Temporary Income Tax Regs., supra, are as

follows:

          (2) The individual’s participation in the activity for
     the taxable year constitutes substantially all of the
     participation in such activity of all individuals (including
     individuals who are not owners of interests in the activity)
     for such year; [or]

          (3) The individual participates in the activity for
     more than 100 hours during the taxable year, and such
                               - 8 -

     individual’s participation in the activity for the taxable
     year is not less than the participation in the activity of
     any other individual (including individuals who are not
     owners of interests in the activity) for such year;

     To satisfy one of these tests, petitioner must establish

that either (1) no other individual’s participation exceeded

petitioner’s participation during 2004 or (2) that petitioner

participated in the activity for more than 100 hours in 2004.

With regard to the second requirement, petitioner has set forth

little evidence to establish that he was involved in the rental

of the cabin for more than 100 hours in the 2004 tax year.    He

has alleged that he took eight maintenance trips to the cabin

during 2004, but in no way has he quantified for the Court the

amount of his active participation time.   In order to establish

that he did spend more than 100 hours engaged in the rental of

the cabin, the Court would expect petitioner to provide evidence

corroborating his claim that his trips to the cabin were indeed

for the purpose of maintenance, e.g., in the form of time logs,

oral testimony, and/or receipts.

     Nor has petitioner established that no other individual’s

participation exceeded his participation in the activity or that

his participation constituted substantially all the participation

in the activity.   Alpine was responsible for advertising,

showing, and renting the property, and after each tenant, a

cleaning service cleaned the property.   Further, petitioner has

conceded that his daughter assisted in the management and
                                - 9 -

maintenance of the cabin and that he contracted with

professionals to provide repair services during 2004.      While we

do not know how much time these services took, they involve a

substantial amount of time.

     It is petitioner’s burden to show that he satisfies the

requirements of section 1.469-5T(a), Temporary Income Tax Regs.,

supra, and he has failed to meet that burden.      On the basis of

the foregoing, we find that petitioner did not materially

participate in this activity.   Accordingly, petitioner is not

allowed to deduct Schedule E expenses relating to the cabin on

his 2004 tax return.

III. Section 280A Personal Use of a Residence

     Section 280A(a) limits otherwise allowable deductions by

individuals with respect to a “dwelling unit” that is used by the

taxpayer during the year as a “residence”.      A taxpayer uses a

dwelling unit as a “residence” if his or her personal use exceeds

the greater of 14 days or 10 percent of the days it is rented at

fair rental value during the year.      Sec. 280A(d)(1).

     If found to be a “residence”, section 280A(c)(5) limits the

deduction of expenses related to the property to the excess of

gross income from the property over deductions allocable to the

rental use that are deductible regardless of the rental use, such

as interest and taxes.   See sec. 280A(b).
                                - 10 -

     However, if a dwelling unit is used during the taxable year

by the taxpayer as a residence and such dwelling unit is rented

for less than 15 days during the taxable year, then no deduction

allocable to the rental use of such dwelling unit is allowed, and

the income derived from such use for the taxable year is not

included in the gross income of the taxpayer under section 61.

Sec. 280A(g).

     Contrary to petitioner’s contention in his brief, a taxpayer

is deemed to “have used a dwelling unit for personal purposes for

a day if, for any part of such day, the unit is used” for

personal purposes by the taxpayer or by any member of the

taxpayer’s family.   Sec. 280A(d)(2).    However, a dwelling unit is

generally not used by a taxpayer for personal purposes on any day

it is principally used to perform repair or maintenance work on

the unit.   Id.

     Petitioner has conceded that he made eight trips to the

cabin in 2004, for a minimum stay of 27 days, and that members of

his family accompanied him on each trip.    He alleges that these

trips were not for personal use, but with regard to the upkeep

and maintenance of the cabin.    Specifically, petitioner claims in

his brief that:   “The only purpose for the owner to travel to the

cabin is for maintenance, inspection and oversight, purchasing

supplies, such as (plumbing, antifreeze, smoke alarm batteries,
                               - 11 -

light bulbs) management and scheduling specialized work or

repair.”

     Petitioner has presented no evidence to substantiate his

contention.   He has not provided to the Court any receipts, work

reports, time logs, or testimony to support his claim that the

motive of his trips and his activity at the cabin was in fact for

upkeep.    Although cautioned at trial that his opening statement

was not evidence that the Court could rely on to make findings of

fact, petitioner chose not to testify at the trial, relying

entirely on the stipulation of facts and the stipulated exhibits

to provide all of the evidence in his case.     Hence, petitioner

has failed to meet his burden of proving that personal use of the

cabin did not exceed the greater of 14 days.     Consequently, the

cabin is considered a residence for purposes of section 280A.

     The parties have stipulated that the cabin was rented for

less than 15 days during 2004.   Therefore, no income from the

rental of the cabin is included in petitioner’s 2004 tax return

and he is not allowed to deduct any expenses related to the

rental of the cabin.   Petitioner is still allowed to deduct the

mortgage interest and taxes attributable to the cabin on Schedule

A, Itemized Deductions, of his 2004 tax return, subject to the

limitations provided in section 68.     See sec. 280A(b).
                             - 12 -

     The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.   To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

     To reflect the foregoing,


                                         Decision will be entered

                                   for respondent.
