- 26 -
(3) The preamble to the final regulations, 59 Fed. Reg.
50485, 50486 (Oct. 4, 1994), T.D. 8565, 1994-2 C.B. 81, 83, states:
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). [Emphasis
added.]
It is inferable from the elimination of the aforementioned
statement in the temporary regulations of 1989 and the preamble to
the proposed regulations of 1992 that the Secretary did not intend
in those proposed regulations to adhere to the position previously
taken in the temporary regulations. As we noted in Schwalbach v.
Commissioner, supra, there is nothing in the 1992 proposed
regulations that would lead us to believe that the Secretary was
proposing to retain the rule set forth in the 1989 temporary
regulations that the activities of a C corporation are not to be
attributable to the corporation's shareholders. See Schwalbach v.
Commissioner, 111 T.C. at 228.
Because the proposed regulations are silent as to whether the
activities of a C corporation are or are not attributable to the
corporation's shareholders, the 1992 proposed regulations are of no
benefit to petitioners in determining their 1993 and 1994 tax
liability.
Finally, we turn our attention to petitioners' credit
argument. A passive activity credit is defined as "the amount * *
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