Chester F. and Faye L. Sidell - Page 23

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          We are persuaded by respondent's responses to petitioners'                  
               Consequently, we conclude that the self-rented property rule           
          in section 1.469-2(f)(6), Income Tax Regs., is valid pursuant to            
          the Secretary's delegated regulation-making authority.                      
               We now turn our attention to petitioners' proposed regulation          
          argument.  The taxpayers in Connor v. Commissioner, T.C. Memo.              
          1999-185, advanced a similar argument.9  We rejected the taxpayers'         
          argument in that case and for the reasons expressed both therein            
          and hereinafter do so in this case.                                         
               As in Connor, petitioners herein assert that the proposed              
          regulations promulgated in 1992 did not specifically disavow the            
          provisions in the temporary regulations issued in 1989, which               
          provided that "a taxpayer's activities do not include operations            

               9    In Connor v. Commissioner, T.C. Memo. 1999-185, the               
          taxpayer husband practiced dentistry and was employed by a                  
          professional service corporation in which he was a shareholder.             
          (Until Oct. 31, 1993, the corporation was known as Michael F.               
          Connor, D.D.S., S.C.; after that date, the corporation was known            
          as Drs. Connor & McKeever, S.C.).  The professional service                 
          corporation leased the building (the Rochester Street building)             
          in which it conducted its business activities from taxpayer wife.           
          The taxpayers reported net income from the rental of the                    
          Rochester Street building as $10,503 and $15,937 in 1993 and                
          1994, respectively.  They reported losses from the rental of                
          another property and losses from a partnership, which they used             
          to offset the rental income from the Rochester Street building.             
          The Commissioner determined that the rental profits from the                
          Rochester Street building constituted nonpassive income and                 
          consequently could not be used to offset the taxpayers' passive             
          losses.  We sustained the Commissioner's determination.                     

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