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We hold that petitioners may not deduct any amount for
points because they have not shown whether or when the Luann
Court residence became their principal place of residence or that
the loans were secured by their principal place of residence, or
proven the amount of points they paid. See sec. 461(g)(2); Rule
142(a).
D. Whether Petitioners' Airplane Leasing Activity Is
a Passive Activity
Individuals generally may not deduct losses from a passive
activity. Sec. 469(a). A passive activity is any activity
involving a trade or business in which the taxpayer does not
materially participate. Sec. 469(c)(1). Rental activities are
per se passive. Sec. 469(c)(2), (4); sec. 1.469-1T(e)(1),
Temporary Income Tax Regs., 53 Fed. Reg. 5702 (Feb. 25, 1988).
Rental activity is any activity in which payments are principally
for the use of tangible property. Sec. 469(j)(8). An activity
is a rental activity for a taxable year if:
(A) During such taxable year, tangible property
held in connection with the activity is used by
customers or held for use by customers; and
(B) The gross income attributable to the conduct
of the activity during such taxable year represents
(or, in the case of an activity in which property is
held for use by customers, the expected gross income
from the conduct of the activity will represent)
amounts paid or to be paid principally for the use
of such tangible property (without regard to whether
the use of the property by customers is pursuant to
a lease or pursuant to a service contract or other
arrangement that is not denominated a lease).
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