Stephen and Ann Schwalbach - Page 8

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          prescribed by the Commissioner under the broad regulatory                   
          authority that Congress delegated to him through sections                   
          469(l)(1) and 7805,2 T.D. 8417, 1992-1 C.B. 173-174, and is                 
          effective for taxable years ending after May 10, 1992, sec.                 
          1.469-11(a)(1), Income Tax Regs.  That section provides in                  
          relevant part:                                                              
               �  1.469-2.  Passive activity loss.-- * * *                            
                         *    *    *    *    *    *    *                              
                    (f)(6) Property rented to a nonpassive activity.                  
               An amount of the taxpayer's gross rental activity                      
               income for the taxable year from an item of property                   
               equal to the net rental activity income for the year                   


               2 In relevant part, sec. 469(l) provides:                              
                    (l) Regulations.--The Secretary [or his delegate,                 
               see sec. 7701(a)(11)(B)] shall prescribe such                          
               regulations as may be necessary or appropriate to carry                
               out provisions of * * * section [469], including                       
               regulations--                                                          
                         (1) which specify what constitutes an                        
                    activity, material participation, or active                       
                    participation for purposes of this section,                       
                         (2) which provide that certain items of                      
                    gross income will not be taken into account                       
                    in determining income or loss from any                            
                    activity * * *,                                                   
                         (3) requiring net income or gain from a                      
                    limited partnership or other passive activity                     
                    to be treated as not from a passive activity                      
                    * * *                                                             
          Sec. 7805(a) generally provides that the "Secretary * * * [or his           
          delegate, see sec. 7701(a)(11)(B)] shall prescribe all needful              
          rules and regulations for the enforcement of [the Internal                  
          Revenue Code]".                                                             



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