                        T.C. Memo. 2001-111



                      UNITED STATES TAX COURT



                  OSAMA A. MOWAFI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1663-00.                        Filed May 10, 2001.



     Mark E. Kellogg, for petitioner.

     Taylor Cortright, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Petitioner petitioned the Court to redetermine

deficiencies of $36,441 and $35,962 in his 1994 and 1995 Federal

income tax.   We must decide whether petitioner is a real estate

professional under section 469(c)(7).    We hold he is not.   Unless

otherwise indicated, section references are to the Internal
                                - 2 -

Revenue Code applicable to the relevant years.   Rule references

are to the Tax Court Rules of Practice and Procedure.

                          FINDINGS OF FACT

     The parties have stipulated some of the facts.   We

incorporate herein by this reference the parties’ stipulation of

facts and the exhibits submitted therewith.   We find the

stipulated facts accordingly.   Petitioner is a well-educated man

whose college degrees include a bachelor’s degree in electrical

engineering (telecommunications), a master’s degree in business

administration (business management), and a doctor’s degree in

electrical engineering.   He resided in Vienna, Virginia, when his

petition was filed.   He filed 1994 and 1995 Federal income tax

returns using the filing status of “Married filing separately”.

     During the subject years, petitioner worked full time for

GTE, Inc. (GTE), as a director of research and the manager of its

research and development facility in Waltham, Massachusetts

(Waltham).1   He generally worked for GTE a minimum of 40 hours

per week, staying at his residence in Waltham during the week

(unless away from Waltham traveling on GTE business) and staying

at his wife’s principal residence in Vienna, Virginia, on the




     1
       GTE paid to petitioner in each of the subject years a
salary of approximately $200,000. In part because of his
supervisor’s perception that petitioner worked “long hours” for
GTE during the subject years, petitioner was later promoted to
vice president.
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weekends.2    He sometimes worked for GTE on the weekends but

usually spent his weekends in Virginia with his wife, son, and

daughter.

     Petitioner also was involved with 17 rental real estate

properties (rental properties) located in Virginia.    He and his

wife jointly owned nine of these rental properties, two of the

others were owned by his brother, and the remaining six were

owned by a partnership in which petitioner was a partner.

Petitioner devoted some of his personal time during each of the

subject years to maintaining and accounting for all of the rental

properties.

     On his 1994 and 1995 Federal income tax returns, petitioner

recognized losses of $115,977 and $92,037, respectively,

attributable to the rental properties.    Respondent determined

that these losses were passive losses the recognition of which

was prohibited by the passive activity loss rules of section 469.

                               OPINION

     Respondent determined and argues that petitioner may not

deduct his claimed losses on account of the rules of section 469,


     2
       Petitioner asks the Court to find as a fact that he worked
in Massachusetts fewer than 3 days a week, referencing his 1994
and 1995 Massachusetts nonresident income tax returns reporting
that he worked in Massachusetts during those respective years on
96 days and 86 days. We decline to do so. The record as a whole
indicates that petitioner was physically present in Waltham at
least 46 weeks while he worked for GTE, less 25 percent of that
time during which he was physically absent from Waltham while
conducting business for GTE.
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which limit the current recognition of passive activity losses.

Petitioner argues that he is excepted from the passive activity

loss limitation rules because, he asserts, he is a real estate

professional under section 469(c)(7).    Petitioner concedes that

respondent’s determination must be sustained if he is not a real

estate professional.

     Individuals such as petitioner are generally precluded from

currently deducting losses from a “passive activity”, a term that

is defined to include any trade or business activity in which the

taxpayer does not materially participate and all rental

activities regardless of the taxpayer’s level of participation.

Sec. 469(a), (c)(1), (2), (4).    These passive loss rules, enacted

as part of the Tax Reform Act of 1986, Pub. L. 99-514, sec. 501,

100 Stat. 2085, 2233, prevent affected taxpayers from using

deductions from a passive activity to shelter wages or other

active income.   See generally Staff of Joint Comm. on Taxation,

General Explanation of the Tax Reform Act of 1986, at 209-215 (J.

Comm. Print 1987).

     Although all rental activities are passive, Congress enacted

an exception for certain post-1993 rental activities.   See sec.

469(c)(7).   Under this provision, petitioner will be considered a

real estate professional, and the losses on his rental properties

will not be per se passive, to the extent that he proves that he

meets the following two requirements:    (1) He performed more than
                                - 5 -

half of his personal services during the year in real property

trades or businesses in which he materially participated and (2)

he worked more than 750 hours a year in those real estate

activities.    See sec. 469(c)(7)(B); see also Rule 142(a)

(petitioner bears the burden of proof); Welch v. Helvering, 290

U.S. 111, 115 (1933) (same).    Petitioner’s burden requires, in

part, that he maintain sufficient documentation to substantiate

the time that he devoted to his rental properties.    See sec.

6001; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per

curiam 540 F.2d 821 (5th Cir. 1976).    As to the evidence that he

may introduce to prove the amount of his personal time that he

devoted to the rental properties, section 1.469-5T(f)(4),

Temporary Income Tax Regs., 53 Fed. Reg. 5727 (Feb. 25, 1988),

provides:

          (4) Methods of proof. The extent of an
     individual's participation in an activity may be
     established by any reasonable means. Contemporaneous
     daily time reports, logs, or similar documents are not
     required if the extent of such participation may be
     established by other reasonable means. Reasonable
     means for purposes of this paragraph may include but
     are not limited to the identification of services
     performed over a period of time and the approximate
     number of hours spent performing such services during
     such period, based on appointment books, calendars, or
     narrative summaries.

     Petitioner has failed to carry his burden; i.e., we are not

persuaded by the record that he was a real estate professional in

either year.    Petitioner strives to meet his burden by relying

primarily on his testimony at trial and noncontemporaneous logs
                                - 6 -

which he prepared in connection with his audit to support the

hours of personal time which he purportedly devoted to the rental

properties.   The logs list 2,102.5 hours and 2,116.5 hours of

personal time that petitioner spent during the respective years

working on the rental properties.   We find these logs

untrustworthy and decline to rely blindly upon them to reach

petitioner’s desired result.3   Cf. Rapp v. Commissioner, T.C.

Memo. 1999-249.   Petitioner, for example, prepared these logs 2

to 3 years after the fact admittedly on the basis of speculation

and with an end result in mind (i.e., the need to arrive at a

certain minimum number of hours being attributable to the rental

properties so that he would meet both the more-than-half-the-

personal-service requirement of section 469(c)(7)(B)(i) and the

750-hour requirement of section 469(c)(7)(B)(ii)), and he

concedes that the times set forth therein may be off by as much

as 20 percent.    The 1994 log also conflicts dramatically with an

earlier log that he prepared listing the time that he purportedly

spent on the rental properties; the prior log lists 1,096.5 hours

of personal services that he performed as to the rental



     3
       As to petitioner’s testimony, we find much of it to be
improbable, questionable, uncorroborated, inconsistent, and self-
serving. Under the circumstances, we are not required to, and we
do not, rely on that testimony to support his position herein.
See Cebollero v. Commissioner, 967 F.2d 986, 989 (4th Cir. 1992),
affg. T.C. Memo. 1990-618; Gatling v. Commissioner, 286 F.2d 139,
143-144 (4th Cir. 1961), affg. T.C. Memo. 1959-224; Tokarski v.
Commissioner, 87 T.C. 74, 77 (1986).
                               - 7 -

properties (or, in other words, enough hours to meet the 750-hour

requirement of section 469(c)(7)(B)(ii) but not enough hours to

meet the more-than-half-the-personal-service requirement of

section 469(c)(7)(B)(i)).4   We also note that some of the

services which he asserts that he performed as to the rental

properties (e.g., his time dedicated to purchasing his residence

in Waltham, traveling between Vienna and Waltham outside of his

work for GTE, and assisting in the preparation of his personal

income tax returns) were for personal business, rather than

related to his rental activities, and that the logs, when

considered in connection with his time cards at GTE, reveal that

he claims to have worked almost 24 hours in a day and, on one

occasion, even more than 24 hours.     We also consider implausible

on this record his assertion that he worked for GTE only 1,832

hours a year and that he spent almost all of his remaining time

working on his rental properties.    See, e.g., Pohoski v.

Commissioner, T.C. Memo. 1998-17.

     Because petitioner has failed to prove either of the

requirements set forth in section 469(c)(7)(B) for 1994 or 1995,

we hold for respondent.   We have considered each of the arguments




     4
       In fact, petitioner increased in the current 1994 log the
number of hours in certain days he claimed to have worked on the
rental properties by as much as 10 to 15.5 hours from the
corresponding days listed in the prior log.
                               - 8 -

made by the parties and have rejected all arguments not discussed

herein as meritless.   Accordingly,

                                            Decision will be entered

                                       for respondent.
