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Rental activity is defined as any activity where payments
are principally for the use of tangible property. See sec.
469(j)(8); sec. 1.469-1T(e)(3)(i), Temporary Income Tax Regs., 53
Fed. Reg. 5702 (Feb. 25, 1988).
Petitioners contend that under the applicable temporary
regulations, their equipment rental activity qualifies for two
exceptions from the above definition of rental activity.
First, rental activity will not be treated as such for
purposes of section 469 where the average period of customer use
of the property is 30 days or less and where significant personal
services are provided by or on behalf of the owner of the
property in connection with making the property available for use
by customers. See sec. 1.469-1T(e)(3)(ii)(B), Temporary Income
Tax Regs., 53 Fed. Reg. 5702 (Feb. 25, 1988).2
Second, otherwise passive rental activity will not be
treated as such for purposes of section 469 where extraordinary
personal services are provided by or on behalf of the owner of
the property in connection with renting the property to customers
(without regard to the average period of customer use). See
sec. 1.469-1T(e)(3)(ii)(C), Temporary Income Tax Regs., 53 Fed.
2 The temporary regulations provide additional exceptions
to the definition of rental activity, but petitioners do not
claim that their equipment rental activity qualifies for any of
the additional exceptions. See sec. 1.469-1T(e)(3)(ii)(D), (E),
and (F), Temporary Income Tax Regs., 53 Fed. Reg. 5702 (Feb. 25,
1988).
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