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(1) In general.--The term "passive activity"
means any activity--
(A) which involves the conduct of any trade
or business, and
(B) in which the taxpayer does not materially
participate.
The parties do not dispute that CDI during the years at
issue was involved in the conduct of a trade or business for
purposes of section 469(c). Rather, petitioners maintain that
petitioner did not materially participate in the activity of CDI
and therefore his share of CDI's income from that activity falls
within the definition set forth in section 469(c)(1). Respondent
avers that petitioners have not sustained their burden of proof.
We agree with respondent.
For the reasons which follow, we hold that petitioners have
failed to establish that petitioner did not materially
participate in the activity of CDI during the years at issue.
Section 469(h) provides:
(h) Material Participation Defined.--For purposes
of this section--
(1) In general.--A taxpayer shall be treated as
materially participating in an activity only if the
taxpayer is involved in the operations of the activity
on a basis which is--
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