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Provision re shareholder’s
participation in his C
corporation’s activities
“Material
“Activity” participation” Overall
Year/event regulation regulation effect
1988 temporary Silent Parenthetical Shareholder
regulations (no activity expressly does not
(T.D. 8175) regulation) provides participate in
shareholder C corporation
does not activities
participate in
C corporation
activities
1989 temporary Definition and Silent Shareholder
regulations example (parenthetical does not
(T.D. 8253) expressly removed) participate in
provide C corporation
shareholder activities
does not
participate in
C corporation
activities
1992 proposed Silent Silent ???
regulations (no definition (same as (at issue in
(PS-1-89) or example) above) the case at
hand)
1994 final Expressly Silent Shareholder
regulations provides that (same as participates
(T.D. 8565) taxpayer’s above) in activities
activities of C
include those corporations
conducted subject to
through C sec. 469
corporations
subject to
sec. 469
V. The 1992 Proposed Regulations Control This Case
As the above discussion makes clear, the 1988 and 1989
temporary regulations expressly provided that shareholders did
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