- 35 -
regular, continuous, and substantial. We conclude that the
material participation test imposed by section 469(h)(1) impli-
cates the amount and extent of time that a taxpayer spends being
involved in the operations of an activity.
In advancing their argument that section 1.469-5T(a)(1),
Temporary Income Tax Regs., supra, is invalid because it is
quantitative, rather than qualitative, in nature, petitioners
rely on the following colloquy on the floor of the U.S. Senate
between Senator Hatfield and Senator Packwood:
Mr. HATFIELD. Such a taxpayer's involvement in the
hotel room rental business includes making the follow-
ing management decisions which an owner of such busi-
ness commonly or customarily makes in conducting such
business: First, the taxpayer actively and regularly
establishes the rental rate of the hotel room; second,
the taxpayer participates in establishing and reviewing
hiring and other personnel policies, including review
of management personnel; third, the taxpayer reviews
and approves periodic and annually audited financial
reports; fourth, the taxpayer participates in budgeting
operating costs and establishing capital expenditures;
fifth, the taxpayer establishes the need for and level
of financial reserves; sixth, the taxpayer selects the
banking depository for rental proceeds and reserve
funds; seventh, the taxpayer has frequent meetings at
the hotel with his agent and onsite contract management
to review operations and the business plan, and to
conduct onsite inspections; eighth, the taxpayer as-
sists in offsite business promotion activities; * * *
* * * * * * *
Mr. PACKWOOD. If the taxpayer can demonstrate that he
had performed and is performing all those functions
which you have described which are integral to the
operations of hotel room rental business and is per-
forming them in such a way and to such an extent that
it demonstrates that the taxpayer's involvement in the
operation of the activity is substantial, continuous
and ongoing, you are correct, such activity would be
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