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breeding and horse racing activities with an actual and honest or
good faith profit objective.
LB Partnership
The passive loss rules of section 469 place limitations on
the deduction of losses relating to passive activities, namely,
from activities in which a taxpayer does not materially
participate. Sec. 469(a)(1) and (2), (c)(1), (d)(1).
As a general rule, a taxpayer will be regarded as not
materially participating in an activity if the taxpayer is not
involved in the operation of the activity on a basis which is
regular, continuous, and substantial. Sec. 469(h)(1); sec.
1.469-5T(a)(7), Temporary Income Tax Regs., 53 Fed. Reg. 5726
(Feb. 25, 1988).
The temporary regulations under section 469 contain seven
separate tests, the qualification under any one of which will
result in a taxpayer's being treated as materially participating
in the activity. Sec. 1.469-5T(a), Temporary Income Tax Regs.,
53 Fed. Reg. 5726 (Feb. 25, 1988). Of the seven separate tests,
petitioners presented evidence and made general arguments that
are applicable only to the test found in section 1.469-5T(a)(7),
Temporary Income Tax Regs., supra, which provides that a taxpayer
shall be treated as materially participating in an activity if,
based on all the facts and circumstances, the taxpayer
participates in the activity on a regular, continuous, and
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