The petitioner was a cardiologist and his wife also worked in his practice. They constructed a house in 1997 and tried to sell it for four years, after which they rented the house for four years to an unrelated tenant, and then to their daughter at one-third of the amount it was rented to the unrelated tenant. They resumed sales efforts in 2010. On their 2008 return, the petitioners indicated the house was rental property with a net loss of $134,360 which they characterized as a passive loss on Form 8582. On the 2009 and 2010 returns the petitions again showed net losses on the property, but indicated they were in the construction business. They filed a 2008 amended return claiming a refund relating to expenses claimed on the house, which IRS disallowed and also assessed an accuracy-related penalty. The IRS determined that the house was held for the production of income and that the losses were passive losses under I.R.C. Sec. 469. The IRS also asserted that the deductions attributable to the house were limited by I.R.C. Sec. 280A. The court agreed with the IRS because a related party lived in the house and used it for personal purposes for more than the greater of 14 days a year or 10% of the number of days the house was rented at fair rental. The court rejected the petitioners’ claim that they were real estate developers that needed to have their daughter live in the house to keep it occupied as required by their homeowners policy which would then make Sec. 280A inapplicable. Thus, the deductions attributable to the house were limited to the extent of rental income. The court upheld the application of the accuracy-related penalty, and did not need to determine whether the losses were passive. Okonkwo v. Comr., T.C. Memo. 2015-181.