- 9 -
applies if petitioners did not materially participate in the
activity. Sec. 469(c)(1).
Petitioners assert that they meet the so-called safe harbor
requirements of section 1.469-5T(a)(2), Temporary Income Tax
Regs., supra. That section provides that the taxpayer's
participation must constitute "substantially all of the
participation in such activity of all individuals" during the
years at issue. But the rental of the condominium required
continual involvement in the leasing and day-to-day management of
the property. The rental agent had complete responsibility for
these activities, and, therefore, petitioners' participation did
not constitute "substantially all of the participation" in the
activity.
Petitioners also assert that they meet the "safe harbor"
requirements of section 1.469-5T(a)(3), Temporary Income Tax
Regs., supra. To satisfy this test, petitioners must establish
that (1) they participated in the activity for more than 100
hours each year, and (2) no other individual's participation
exceeded petitioners' participation during each year. Regardless
whether petitioners satisfy the first requirement, they have not
established that no other participation exceeded their
participation in the activity. The rental agent not only
advertised, showed, and rented the property, but was also
routinely available to handle complaints, repairs, etc. Further,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011