- 21 -
nonpassive. As a result, petitioners maintain that the section
469 issue does not involve a partnership item. Sec. 6231(a)(3).
We conclude that the Partnership reported its losses as
arising from trade or business activity (other than rental
activity) on its returns for the years in dispute. (In reaching
our conclusion, we note that we are not making an inappropriate
review of the partnership's returns. See Roberts v.
Commissioner, 94 T.C. at 862.) The Partnership reported its
income and expense on its returns for 1989 and 1990 immediately
below the following statement: "Caution: Include only trade or
business income and expenses on lines 1(a) through 21 below." In
addition, lines 2 and 3 on the Schedules K require the
Partnership to report its income or loss arising from rental
activities. Respondent's instructions for these lines refer the
reader to Publication 925, Passive Activity and At-Risk Rules,
for the purpose of defining rental activities. The Partnership
left lines 2 and 3 blank for its taxable years 1989 and 1990.
Moreover, line 1 of the Schedules K-1 reports the partners'
distributive share of the Partnership's losses as arising from
trade or business activities.
It is true, as respondent points out, that line B of the
Partnership's returns for 1989 and 1990 describes the principal
product or service of the Partnership as "rentals". Contrary to
respondent's contention, however, such a description is not
dispositive of the nature of the Partnership's activity for
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