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such taxpayer should be permitted to use tax benefits from the
activity." Id.
It is important, therefore, to define the activity subject
to the limits of section 469. For income tax purposes there are
generally two economic interests involved in the ownership of
real estate--the value of the asset as an investment, and if
rented, the value of the rental income. As to the first, the
value of the asset may appreciate or depreciate, and, the
resulting gain or loss is generally recognized as a capital
transaction when the property is sold even though the economic
gain or loss was realized over the years that the property was
owned. See sec. 1001. On the other hand, the leasing activity
gives rise to gross income and deductions, and the net income or
loss generally is realized and recognized during each taxable
year that the property is rented. See secs. 61, 441. When
section 469 applies to rental real estate, it operates to suspend
losses from the leasing activity. Accordingly, we will use the
terms "activity" and "leasing activity" interchangeably.
In this case, the average lease period of the condominium
was 7 days or less during the years at issue, and, therefore, the
leasing activity is not a "rental activity" for purposes of
section 469(c)(2). Sec. 1.469-1T(e)(3)(ii)(A), Temporary Income
Tax Regs., supra. While the leasing activity falls outside the
definition of a "rental activity", section 469 nonetheless
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