- 14 -
1219, 1221, was promulgated. In the text of these proposed
regulations, the Secretary removed the explicit statement
prohibiting attribution from a C corporation to the corporation's
shareholders. No further specific guidance as to the Secretary's
ultimate position on this subject matter was then provided.
However, the preamble to the regulation stated that "[The proposed
regulation] propose to replace � 1.469-4T with a new � 1.469-4,
which will provide a modified definition of the term activity."
Id. at 20802.
In 1994, the proposed regulations issued in 1992 were replaced
by the final version of section 1.469-4(a), Income Tax Regs., which
included the following sentence: "A taxpayer's activities include
those conducted through C corporations that are subject to section
469, S corporations, and partnerships." Sec. 1.469-4(a), Income
Tax Regs. This represented a reversal of the Secretary's position
enunciated in the temporary regulations published in 1989. It is
worth noting that the preamble to the final regulations stated:
A commentator requested clarification on whether
activities conducted through a C corporation may be
grouped with activities not conducted through the C
corporation. The final regulations clarify that in
determining whether a taxpayer materially or
significantly participates in an activity, a taxpayer may
group that activity with activities conducted through C
corporations that are subject to section 469 (that is,
personal service and closely held C corporations). [59
Fed. Reg. 50485 (Oct. 4, 1994), T.D. 8565, 1994-2 C.B. at
82.]
See Schwalbach v. Commissioner, supra at 225.
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