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participated in KGR's operations, through his grantor trusts he
rented several pieces of real property to KGR. KGR used the leased
property in conducting its apparel business. By being in effect
both the lessor and lessee of the properties in question, Mr.
Sidell established the amounts of rent, and, unless the resulting
rental income is deemed nonpassive, he could have used all of his
passive losses to offset that income.
Moreover, there is ample legislative history and proper
delegation under section 469(l) supporting respondent's attribution
of KGR's activities to Mr. Sidell. Specifically, Congress
authorized the Secretary to promulgate regulations that specify
what constitutes an "activity" and what constitutes material
participation. Further, Congress permitted the Secretary to
promulgate regulations that permitted recharacterization of "net
income or gain from a limited partnership or other passive activity
as [being] not from a passive activity." Sec. 469(l)(1), (3). We
believe "other passive activity" encompasses activities of a C
corporation engaged in a trade or business.
8(...continued)
distinction, Mr. Sidell's day-to-day management of KGR's only
line of business would constitute material participation in all
the activities of KGR, which consequently would trigger the self-
rented property rule. See sec. 1.469-5T(a), Temporary Income Tax
Regs., 53 Fed. Reg. 5686, 5700 (Feb. 25, 1988), T.D. 8175, 1988-1
C.B. 191, 234.
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