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Discussion
Section 469 generally disallows for the taxable year any
passive activity loss that exceeds passive activity income.
Sec. 469(a)(1), (d)(1). Passive activity is any activity which
involves the conduct of any trade or business in which the
taxpayer does not materially participate. Sec. 469(c)(1).
Without regard to whether a taxpayer materially participates in
an activity, the term “passive activity” includes any rental
activity. Sec. 469(c)(2), (4).
A rental activity is any activity where payments are
principally for the use of tangible property. Sec. 469(j)(8).
There are exceptions to the definition of “rental activity”.
Section 1.469-1T(e)(3)(ii). Temporary Income Tax Regs., 53 Fed.
Reg. 5702 (Feb. 25, 1998), provides:
an activity involving the use of tangible
property is not a rental activity for a taxable year if
for such taxable year --
(A) The average period of customer use for such
property is seven days or less;
(B) The average period of customer use for such
property is 30 days or less, and significant personal
services (within the meaning of paragraph (e)(3)(iv) of
this section) are provided by or on behalf of the owner
of the property in connection with making the property
available for use by customers;
4(...continued)
$200 of the $1,900 claimed as legal expenses. At trial,
respondent conceded the latter adjustment.
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Last modified: May 25, 2011