Thomas P. and Ermina A. Krukowski - Page 17




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               do not allow them to use it [i.e., the only rule stated                  
               in sec. 1.469-4T(b)(ii)(B), Temporary Income Tax Regs.,                  
               45 Fed. Reg. 20543 (May 12, 1989), namely, that “a                       
               taxpayer's activities do not include operations that                     
               the taxpayer conducts through one or more entities                       
               (other than passthrough entities).”].  See sec.                          
               1.469-11, Income Tax Regs.  [Id.]                                        
          Although we recognize that section 1.469-11(b)(1), Income Tax                 
          Regs., does not explicitly reference section 1.469-4T(b)(ii)(B),              
          Temporary Income Tax Regs., but, instead, allows taxpayers to use             
          the rules set forth in the 1992 proposed regulations, we believe              
          that this distinction is meaningless under the facts herein.                  
          Whereas section 1.469-4T(b)(ii)(B), Temporary Income Tax Regs.,               
          contains an explicit rule under which a taxpayer is not                       
          considered to participate in a C corporation’s activities,                    
          petitioner effectively asks the Court to imply the same rule in               
          the 1992 proposed regulations by virtue of the fact that those                
          regulations are silent as to the inapplicability of such a rule.              
          We decline to do so.  Accord Sidell v. Commissioner, T.C. Memo.               
          1999-301; Connor v. Commissioner, T.C. Memo. 1999-185.                        
               We conclude that petitioner may not offset part of the                   
          income that he realized on his rental of the office building to               
          the law firm, by the loss that he realized on his rental of the               
          club to the health club.  We have considered all arguments in                 











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