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income. Section 469, however, limits the deductions for losses
from a "passive activity". A passive activity means any activity
(A) which involves the conduct of any trade or
business, and
(B) in which the taxpayer does not materially
participate. [Sec. 469(c)(1).]
Generally, an activity in which payments are received
principally for the use of tangible property by customers is a
"rental activity". Sec. 469(j)(8); sec. 1.469-1T(e)(3)(i)(A),
Temporary Income Tax Regs, 53 Fed. Reg. 5702 (Feb. 25, 1988).
All rental activities are deemed passive. Sec. 469(c)(2), (4);
sec. 1.469-1T(e)(1), Temporary Income Tax Regs., 53 Fed. Reg.
5702 (Feb. 25, 1988). However, if the average period of customer
use of the property is 7 days or less, the activity is not
considered to be a "rental activity". Sec. 1.469-
1T(e)(3)(ii)(A), Temporary Income Tax Regs., 53 Fed. Reg. 5702
(Feb. 25, 1988). Nonetheless, an activity falling outside the
definition of a rental activity will be passive if the taxpayer
does not materially participate in the activity. Sec. 469(c)(1);
sec. 1.469-1T(e)(1), Temporary Income Tax Regs., supra.
An individual materially participates in an activity when
involved in the operations of the activity on a regular,
continuous, and substantial basis. Sec. 469(h)(1). Pursuant to
section 469(l)(1), the Secretary has issued regulations that
specify what constitutes material participation. Section 1.469-
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