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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
(continued...)
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