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respect to the second set, the final regulations addressed the
treatment of activities which were conducted through a C
corporation. In a complete reversal from the position stated in
the first set of proposed regulations, the final regulations
provided an attribution rule under which a taxpayer's activities
include activities conducted through a C corporation subject to
section 469. Sec. 1.469-4(a), Income Tax Regs. In line with
this attribution rule, the preamble to the final regulations
stated:
A commentator requested clarification on whether
activities conducted through a C corporation may be
grouped with activities not conducted through the C
corporation. The final regulations clarify that in
determining whether a taxpayer materially or
significantly participates in an activity, a taxpayer
may group that activity with activities conducted
through C corporations that are subject to section 469
(that is, personal service and closely held C
corporations). [T.D. 8565, 1994-2 C.B. at 82.]
As we understand the thrust of petitioners' argument, an
application of section 1.469-2(f)(6), Income Tax Regs., to the
material participant of a C corporation activity is vague
because, absent regulations, the meaning of the word "activity"
does not attribute to an individual the activities of a C
corporation. According to petitioners, the breadth of the word
"activity" must be known in order to apply the rules of section
469 and the regulations thereunder, and the Commissioner did not
settle on a meaning for that word until he issued section
1.469-4, Income Tax Regs., in 1994. Even then, petitioners
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