Stephen and Ann Schwalbach - Page 16

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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                
                    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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