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I. Whether Petitioner Materially Participated in CDI in 1990 and
1991
Respondent argues that the income realized by petitioners
from CDI was not passive within the meaning of section 469, and,
accordingly, petitioners may not deduct their undisputed passive
losses from the partnerships against it for the years at issue.
(We note that section 469(c)(7), which provides special rules for
taxpayers in the real property business concerning the nature of
rental real estate activity, was not in effect for the years at
issue.) Petitioners, on the other hand, contend that they may
deduct their passive losses from the Citimark partnerships
against what is, according to their position, passive income of
CDI.
Section 469(a)(1) provides generally that any passive
activity loss claimed by a taxpayer during any taxable year is
not allowable as a deduction. Section 469(a)(2) includes as
affected taxpayers, among others, any individual. Section
469(d)(1) provides that the term "passive activity loss" means
the amount, if any, by which the aggregate losses from all
passive activities for the taxable year exceed the aggregate
income from all passive activities for such year.
Section 469(c) defines a passive activity as follows:
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