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petitioner's activities as a board member cannot be considered
for the purposes of this test if other individuals providing
management services are compensated. Mordkin v. Commissioner,
supra.
The record indicates that both MHM, Inc., and Richfield
employed individuals to manage the day-to-day operation of Wisp.
Consequently, respondent argues that section 1.469-
5T(b)(2)(ii)(A), Temporary Income Tax Regs., supra, precludes
petitioner's board activities from being considered participation
under section 1.469-5T(a)(7), Temporary Income Tax Regs., supra.
Were we to accept respondent's position, petitioner's activities
would not be considered material participation under section
1.469-5T(a)(7), Temporary Income Tax Regs., supra.
Petitioner argues that the activities of onsite management
should not be considered "management services" for the purposes
of section 1.469-5T(a)(7) and (b)(2)(ii)(A), Temporary Income Tax
Regs., supra. To support this position, petitioner cites Staff
of Joint Comm. on Taxation, General Explanation of the Tax Reform
Act of 1986, at 241 (J. Comm. Print 1987) (hereinafter the
General Explanation), which states:
The application of the material participation
standard to a condominium hotel that is not a rental
activity for purposes of the passive loss rules may be
illustrated as follows. Assume that an individual who
is an investor in the hotel does not live nearby, has a
principal business that is unrelated to operating the
hotel, is inexperienced in the hotel business, and
employs agents to perform various essential hotel
functions. However, such individual's participation in
the hotel business involves making frequent visits to
the hotel in order to conduct onsite inspections, meet
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