In a recent Tax Court Memorandum decision (TC Memo 2015-95), a married couple was not entitled to deduct a loss on the sale of a seasonal home because the residence was not acquired in a profit-motivated transaction nor was it subsequently converted to an income-producing rental property. This resulted in a nondeductible personal loss when it was sold for less than its original cost.
In addition, rental expenses claimed by the taxpayers were disallowed because the couple did not make a bona fide attempt to rent out the property, even though the taxpayer claimed he contracted a realtor to actively solicit the property for rent. The taxpayers were also liable for accuracy-related penalties with respect to the understatement of tax for each year.
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