Barry H. and Marilyn S. Scheiner - Page 7

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                any activity where payments are principally for the use                      
                of tangible property.  See also sec. 1.469-1T(e)(3)(i),                      
                Temporary Income Tax Regs., 53 Fed. Reg. 5702 (Feb. 25,                      
                1988).  However, an activity involving the use of                            
                tangible property is not a rental activity for a                             
                taxable year, inter alia, if for such taxable year the                       
                average period of customer use for such property is                          
                seven days or less.  Sec. 1.469-1T(e)(3)(i) and                              
                (ii)(A), Temporary Income Tax Regs., supra.                                  
                In this case, the parties agree that the average period of                   
          customer use of petitioners' condominium unit at Wisp was less                     
          than 7 days during each of the years at issue.  The parties thus                   
          agree that petitioners' condominium hotel activity is not a                        
          rental activity as defined in section 469(j)(8) and the                            
          regulations thereunder and, thus, is not considered a passive                      
          activity under section 469(c)(2).  Nevertheless, petitioners'                      
          activity at Wisp will constitute a passive activity under section                  
          469(c)(1) unless they establish that they materially participated                  
          in the activity during the taxable years in issue.  In Mordkin v.                  
          Commissioner, supra, we discussed the Code and regulations                         
          relating to material participation as follows:                                     
                     Section 469(h)(1) provides that generally an                            
                individual shall be treated as materially participating                      
                in an activity only if he or she is involved in the                          
                operations of the activity on a basis that is regular,                       
                continuous, and substantial.  Congress expressly                             
                authorized the Secretary of the Treasury (Secretary) to                      
                prescribe such regulations as may be necessary or                            
                appropriate to carry out the provisions of section 469,                      
                including regulations that specify what constitutes                          
                material participation.  Sec. 469(1)(i).                                     
                     Both temporary and final regulations relating to                        
                the meaning of the terms "participation" and "material                       
                participation" have been promulgated under section 469.                      
                With respect to the term "participation", final                              
                regulations issued under section 469 provide that                            
                generally "any work done by an individual (without                           



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