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activities such as attending board meetings and/or making some
repairs to their unit. Petitioner husband also attended several
BBCA meetings in St. Paul, Minnesota, during the taxable years in
issue. Petitioners sold their unit on or about October 31, 1997.
On Schedules C attached to their 1991, 1992, and 1993
returns, petitioners reported the following amounts with respect
to the rental of their unit:
1991 1992 1993
Gross Income $36,554 $40,202 $38,029
Total Expenses (46,096) (50,360) (46,454)
Net Loss (9,542) (10,158) (8,425)
Petitioners claimed business loss deductions on their 1991,
1992, and 1993 returns in amounts equal to the amounts of their
net losses reported on the Schedules C. In the statutory notice
of deficiency, respondent disallowed the claimed business loss
deductions on the ground that the losses were sustained in
connection with an activity in which petitioners did not
materially participate.
Section 469 generally disallows for the taxable year any
passive activity loss that exceeds passive activity income. See
sec. 469(a), (d)(1). A passive activity is any activity which
involves the conduct of any trade or business in which the
taxpayer does not materially participate.2 See sec. 469(c)(1).
2 The term "passive activity" also includes any "rental
activity", regardless of whether the taxpayer materially
(continued...)
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