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and any other acceptable materials, together with the affidavits,
if any, show that there is no genuine issue as to any material
fact and that a decision may be rendered as a matter of law."
Rule 121(b); see P & X Mkts., Inc. v. Commissioner, 106 T.C. 441,
443 (1996), affd. without published opinion 139 F.3d 907 (9th
Cir. 1998); see also Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247-251 (1986).
Petitioner challenges the ability of the Commissioner to
apply the recharacterization rule to the rental income from the
office building. Petitioner argues primarily that the
recharacterization rule is invalid because it conflicts with
explicit statutory text as to the characterization of income
derived from a rental activity. Petitioner observes that section
469(c)(2) and (4) provides that a rental activity is generally
passive and that the recharacterization rule provides that
certain rental income is nonpassive.
We disagree with petitioner that the recharacterization rule
is invalid. The recharacterization rule is a legislative
regulation, see Schwalbach v. Commissioner, 111 T.C. 215, 220
(1998) (the Secretary had to comply with the Administrative
Procedure Act (APA), 5 U.S.C. sec. 553(b) and (c) (1994), when he
prescribed sec. 1.469-2(f)(6), Income Tax Regs., because the
rules contained therein are legislative rather than
interpretative); see also Fransen v. United States, 191 F.3d 599,
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