Chester F. and Faye L. Sidell - Page 20

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          limited partnership or other passive activity to be treated as not          
          from a passive activity."  Sec. 469(l)(1), (3) (emphasis added).            
          This Court has already determined that section 1.469-2(f)(6),               
          Income Tax Regs., is a legislative regulation promulgated under             
          section 469(l).  See Schwalbach v. Commissioner 111 T.C. at 220-            
          221. Accordingly, we give that regulation the highest level of              
          judicial deference.  See Chevron U.S.A., Inc. v. Natural Resources          
          Defense Council, Inc., 467 U.S. 837, 843-844 (1984); Fransen v.             
          United States, 82 AFTR 2d 6621, 98-2 USTC par. 50776 (E.D. La.              
          1998); Schwalbach v. Commissioner, supra; Jablonski v.                      
          Commissioner, supra.                                                        
          Analysis of Parties' Arguments                                              
               Petitioners maintain in their validity argument that the self-         
          rented property rule cannot apply to reclassify their rental income         
          as nonpassive because KGR's business activities cannot be                   
          attributed to Mr. Sidell for purposes of determining "material              
          participation".  We disagree.  Mr. Sidell's transaction with KGR is         
          the epitome of a self-renting transaction.  Mr. Sidell is the sole          
          shareholder of KGR and manages its operations in various                    
          capacities.8  At the same time that Mr. Sidell materially                   

               8    Petitioners acknowledge that Mr. Sidell materially                
          participated in KGR. However, they argue that there is a                    
          distinction between materially participating in KGR and                     
          materially participating in the activities of KGR.  Petitioners             
          cite no authority to support this distinction.  Regardless of any           

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