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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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Last modified: May 25, 2011