James R. & Anita Madler - Page 10

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                  monthly basis.  This decision making process occurs                                   
                  each month in which a rental income or expense                                        
                  statement is received from the rental agreement.  At                                  
                  that time a management decision is made whether to                                    
                  continue or terminate the participation in the rental                                 
                  agreement * * * in that the rental agreement is                                       
                  terminable at will * * *.                                                             
                        * * * [Petitioners] may at any time elect to                                    
                  provide the rental services themselves or to procure                                  
                  another agent for these services.  Under these                                        
                  conditions the Petitioners are making significant and                                 
                  [bonafide] management decisions on a month-to-month                                   
                  basis whether to continue, cancel, or make another                                    
                  agency relationship.                                                                  
                  Petitioners have offered no evidence to indicate that they                            
            personally approved of tenants, decided rental terms, approved of                           
            expenditures for repairs and capital improvements, or in any way                            
            participated in the management of the unit in a significant and                             
            bona fide sense.  It appears that VDS, rather than petitioners,                             
            performed all significant management activities.  Moreover, we do                           
            not consider petitioner's ability to terminate the contract with                            
            VDS as active participation per se; the legislative history of                              
            section 469 explains that taxpayers must themselves genuinely                               
            exercise independent discretion and judgment.  On the basis of                              
            the record before us, we conclude that petitioners have failed to                           
            establish that they actively participated in the activity of                                
            renting the condominium unit during each of the years in issue.                             
            Therefore, assuming that the average period of customer use of                              
            petitioner's condominium unit was greater than 7 days,                                      







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