Michael D. and Joan Welch - Page 7

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          activity” as defined above, for any rental activity is a passive            
          activity.  If petitioner establishes that the activity was not a            
          rental activity, he then must establish that he materially                  
          participated in the activity to avoid the proscription of section           
          469.                                                                        
               On this record, we find that petitioner provided equipment             
          to production companies for an average period of 30 days or less            
          and that he performed significant personal services in connection           
          with making the property available for use by customers.                    
          Petitioner acquired, maintained, transported and repaired the               
          tools and equipment.  We also find that petitioner provided                 
          extraordinary personal services.  The rental of the tools and               
          equipment by the production companies is incidental to their                
          receipt of petitioner’s services as construction coordinator.               
          Therefore, we hold that petitioner’s activity was not a rental              
          activity within the meaning of section 469(j)(8).                           
               A taxpayer is treated as materially participating in an                
          activity only if the taxpayer is involved in the operations of              
          the activity on a basis which is regular, continuous, and                   
          substantial.  Sec. 469(h)(1).  Petitioner’s business as                     
          construction coordinator was regular, continuous (for each                  
          project), and substantial.  Therefore, we hold that petitioner              
          materially participated in his rental activity, and the                     







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