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In general, section 469(h)(1) provides that a taxpayer shall
be 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. Section 469(l)
authorizes the Secretary to prescribe regulations as may be
necessary or appropriate to carry out the provisions of section
469, including regulations which specify what constitutes
material participation. See sec. 469(l)(1).
Section 1.469-5T(a), Temporary Income Tax Regs., 53 Fed.
Reg. 5725-5726 (Feb. 25, 1988), provides that an individual will
be treated as materially participating in an activity for the
taxable year if:
(1) The individual participates in the activity
for more than 500 hours during such year;
(2) The individual's participation in the
activity for the taxable year constitutes substantially
all of the participation in such activity of all
individuals (including individuals who are not owners
of interests in the activity) for such year;
(3) The individual participates in the activity
for more than 100 hours during the taxable year, and
such individual's participation in the activity for the
taxable year is not less than the participation in the
2(...continued)
participates in the activity. Sec. 469(c)(2), (4). A rental
activity is any activity where payments are principally for the
use of tangible property. See sec. 469(j)(8). However,
petitioners' activity does not constitute a rental activity
within the meaning of sec. 469(j)(8) because the average customer
stay at their unit was less than 7 days. See sec. 1.469-
1T(e)(3)(ii)(A), Temporary Income Tax Regs., 53 Fed. Reg. 5702
(Feb. 25, 1988).
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