Barry H. and Marilyn S. Scheiner - Page 14

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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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