Chester F. and Faye L. Sidell - Page 14

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          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              
          See Schwalbach v. Commissioner, supra at 225.                               

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