- 16 -
considered for the purposes of section 1.469-5T(a)(7) and
(b)(2)(ii)(A), Temporary Income Tax Regs., supra, are those
within the prerogative of the owners; i.e., board activities. As
no members of the Wisp board were compensated, petitioner argues
that her activities constitute material participation under
section 1.469-5T(a)(7), Temporary Income Tax Regs., supra.
We do not agree with petitioner's position. The General
Explanation passage cited by petitioner was not meant to be
construed as a safe harbor. Rather, the language cited by
petitioner indicates that taxpayers may hire onsite management
while engaging in activities sufficient to constitute material
participation, but only "if the standard requiring regular,
continuous, and substantial involvement" is otherwise satisfied.8
8 Similarly, in Mordkin v. Commissioner, T.C. Memo. 1996-
187, the taxpayer cited the colloquy between Senators Packwood
and Hatfield in arguing that sec. 1.469-5T(a)(1), Temporary
Income Tax Regs., 53 Fed. Reg. 5725 (Feb. 25, 1988), was invalid
because it "required" an individual to participate in an activity
for greater than 500 hours before being treated as having
materially participated in that activity. Specifically, the
taxpayer relied upon the colloquy to argue that the determination
of whether an individual materially participates in an activity
should be based solely upon the integral nature of the work
performed by the taxpayer, and not upon the quantity of work. We
rejected the taxpayer's argument, stating:
The foregoing colloquy between Senator Hatfield and
Senator Packwood makes it clear that services performed
by a taxpayer that are deemed integral to the
operations of a condominium hotel will constitute
material participation by the taxpayer in those
operations only if the taxpayer performs those services
in such a way and "to such an extent" that it shows
that the taxpayer's involvement in those operations is
regular, continuous, and substantial. Contrary to [the
taxpayer's] contention, that colloquy does not in any
(continued...)
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011