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purposes of section 469(c)(2). Although the general rule under
section 1.469-1T(e)(3)(i), Temporary Income Tax Regs., 53 Fed.
Reg. 5702 (Feb. 25, 1988), is that the receipt of gross income
from holding tangible property for use by customers constitutes a
rental activity, section 1.469-1T(e)(3)(ii), Temporary Income Tax
Regs., supra, provides a number of exceptions to the general
rule, such that an activity involving the holding of tangible
property for use by customers does not necessarily amount to per
se passive "rental activity" within the ambit of section
469(c)(2).
Finally, notwithstanding respondent's assertions, lines
19(b) and 20(b), Analysis of total distributive income/payment
items by type of partner, of the Schedules K for 1989 and 1990,
respectively, which reported losses as largely passive to the
limited partners, are not substantively equivalent to reporting
partnership activities as rental activities within the meaning of
section 469(c)(2). The reported passive losses could have arisen
either from rental activity or from a trade or business that did
not consist of rental activity. Respondent's instructions for
completing Schedules K for the years in question direct
partnerships to classify a partner's losses as passive if the
partnership does not know the character of the losses in the
hands of the partner, irrespective of the partnership activity.
In light of the above, we conclude that the Partnership
reported its losses as arising from trade or business activity
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