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Regs., supra at 5725. “Participation” generally means any work
done in an activity by an individual who owns an interest in the
activity. Sec. 1.469-5(f)(1), Income Tax Regs.
Petitioner wife has shown, through exhibits and testimony,
that she provided regular and substantial services to AGI’s
tenants. Petitioner wife was daily onsite and in charge of AGI’s
leasing activities and legal support services during the years at
issue. She estimated, in retrospect, that her total time spent
on office leasing activities was approximately 1,340 hours per
year. As the onsite manager of AGI’s legal support services,
petitioner wife supervised the office staff, met the business and
legal needs of “nine to ten” tenant attorneys and other non-
tenant attorneys. Petitioner wife also performed payroll,
accounts payable, and accounts receivable services, and
maintained the law library.
Respondent argues that, while petitioner wife provided a
good faith estimate of her time spent in AGI’s activities, it was
not based on any objective measure, and the lack of
contemporaneous logs or calendars cast doubt on her pretrial
estimate of time spent in the activities.10 As a result,
10It is not clear whether respondent disputes that
petitioner wife materially participated in the activity. For
example, respondent discusses Shaw v. Commissioner, T.C. Memo.
2002-35, which held that a taxpayer had not materially
participated in a passive activity. Respondent also claimed that
petitioner wife did not adequately document the extent of time
she spent on the activity. Respondent’s arguments, however,
focused primarily on the number of hours petitioner wife worked
in relation to the real estate professional exception, which
requires, among other things, that petitioner wife spend in
excess of 750 hours on the activity. Because our holding does
(continued...)
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