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activity only if he or she is regularly, continuously, and
substantially involved in its operations. Sec. 469(h)(1). The
regulations contain seven safe harbors under which an individual
is deemed to materially participate in an activity. Sec.
1.469-5T(a), Temporary Income Tax Regs., 53 Fed. Reg. 5725-5726
(Feb. 25, 1988).
A taxpayer materially participates in an activity if he or
she participates in the activity for more than 500 hours during
the year. Sec. 1.469-5T(a)(1), Temporary Income Tax Regs.,
supra. Petitioners contend that petitioner meets that test.3
Petitioner testified that he spent about 400-500 hours
participating in the operations of the corporation. Larry Ragar
(Ragar), the used car manager at Bob Wade Ford in 1988 and 1989
and now at South Lake Ford, testified that petitioner worked more
than 500 hours at the dealership in each of the years 1988 and
1989.
Petitioner’s and Ragar's testimony that petitioner worked as
much as 500 hours at the dealership during the years at issue is
not credible. Wade, the president of Bob Wade Ford during the
years in issue, testified that petitioner had no duties or
responsibilities at the dealership. Petitioner has lived in
Panama for more than 60 years. Petitioner never managed the
dealership or did any selling or buying, bookkeeping, payroll, or
3 Petitioners concede that Mrs. Bohannon did not materially
participate in the operations of Bob Wade Ford in 1988 and 1989.
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