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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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