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$25,000 offset to passive income provided by section 469(i) for
taxpayers who "actively participate" in a rental real estate
activity insofar as section 469(i)(6)(C) provides that a limited
partner is deemed not to actively participate in such activity
except as provided by regulation, and no such regulation permits
a limited partner to claim active participation in rental real
estate activity for 1989 and 1990.) Respondent invites our
attention to line B of the Partnership's returns for 1989 and
1990, which describes the principal product or service of the
Partnership as "rentals".
Petitioners concede that, should the Court determine that
the Partnership's returns for 1989 and 1990 are to be construed
as reporting that the Partnership's losses derive from rental
activity within the meaning of section 469(c)(2), then the
characterization of those losses in the hands of petitioners
would constitute a partnership item. But petitioners do not
concede that the Partnership's reporting is to be so construed.
Rather, petitioners argue that the Partnership reported its
losses as arising from a trade or business that was not rental
activity on its returns and attached Schedules K and K-1 for
those years. Thus, petitioners claim that factual issues
regarding the extent of their participation in the Partnership's
activities must be resolved before their distributive share of
the Partnership's losses can be characterized as passive or
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