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We find that the specific exception for a disposition of
property that produces portfolio income takes precedence over the
more general rule regarding the treatment of gain from the
disposition of property used in an activity. See HCSC-Laundry v.
United States, 450 U.S. 1, 6, 8 (1981) (holding that a specific
provision takes precedence over a general one). When a
disposition is of property that generates portfolio-type income,
the more specific provisions regarding the disposition of such
property should apply in accordance with the Congressional aim
behind the portfolio income exception. We therefore apply
section 469(e)(1)(A) and section 1.469-2T(c)(3), Temporary Income
Tax Regs., 53 Fed. Reg. 5686, 5713 (Feb. 25, 1988), to the
present case.
Application of Section 469(e)(1)(A) and Section 1.469-2T(c)(3)
As noted earlier, passive activity gross income does not
include portfolio income. See sec. 469(e)(1)(A); sec. 1.469-
2T(c)(3)(i), Temporary Income Tax Regs., 53 Fed. Reg. 5686, 5713
(Feb. 25, 1988). Portfolio income includes: (1) Any gross
income from interest, dividends, annuities, or royalties not
derived in the ordinary course of a trade or business, and (2)
any gain or loss not derived in the ordinary course of a trade or
business which is attributable to the disposition of property
producing income of a type described in (1) or property held for
investment. See id.
The regulations provide for this purpose a narrow definition
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