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with onsite management, and otherwise participate in
integral functions of the business. In addition, the
individual on a regular basis uses his independent
discretion to make business decisions such as the
following: (1) regularly establishing room rental
rates, (2) establishing and reviewing hiring and other
personnel policies, including review of management
personnel, (3) reviewing and approving periodic and
annually audited financial reports, (4) participating
in budget operating costs and establishing capital
expenditures, (5) establishing the need for and level
of financial reserves, (6) selecting the banking
depository for rental proceeds and reserve funds, (7)
participating in frequent meetings at the hotel to
review operations and the business plan, and (8)
assisting in offsite business promotion activities.
* * *
Under these circumstances, if the standard
requiring regular, continuous, and substantial
involvement is satisfied, then the taxpayer is treated
as materially participating in the hotel activity. He
is not so treated, however, in the absence of
sufficient involvement. No safe harbor should be
inferred from the preceding paragraph. * * * [Emphasis
added.]
The above-quoted language summarizes colloquies between Senators
Packwood and Hatfield on the floor of the U.S. Senate. See 132
Cong. Rec. 15032, 26685-26686 (1986) (colloquies between Senators
Packwood and Hatfield). According to petitioner, the passage
indicates Congress' intent to provide owners of condominium hotel
units with the opportunity to hire onsite management without
triggering the application of passive loss restrictions.
Petitioner thus argues that respondent's interpretation of the
management-related limitations of section 1.469-5T(a)(7),
Temporary Income Tax Regs., supra, would preclude the hiring of
any onsite management, thereby ignoring congressional intent.
Petitioner contends that the only "management services" to be
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