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of $18,867 and $17,044, respectively, for the automobile rental
business.
In the notice of deficiency, respondent determined that
petitioner was not entitled to the claimed Schedule C losses
under section 469(a) because petitioner's automobile rental
activity constituted a rental activity as defined in section
469(c)(2).
OPINION
Generally, any passive activity loss claimed by a taxpayer
is not allowable as a deduction by virtue of section
469(a)(1)(A). A passive activity is any activity that involves
the conduct of a trade or business in which the taxpayer does not
materially participate. See sec. 469(c)(1). However, section
469(c)(2) and (4) provides that regardless of material
participation, any rental activity, is generally a passive
activity.4 Rental activity is any activity where tangible
property held in connection with the activity is used by
customers or held for use by customers, and the gross income
attributable to the activity represents amounts paid principally
for the use of the tangible property. See sec. 469(j)(8); sec.
1.469-1T(e)(3)(i)(A), and (B), Temporary Income Tax Regs., 53
Fed. Reg. 5702 (Feb. 25, 1988).
4 An exception is statutorily provided for certain
taxpayers in real property trades or businesses. See sec.
469(c)(2), (7).
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