- 8 - petitioners materially participated in the operation of their Lake Arrowhead property during 1996 and 1997. Section 469 generally disallows for the taxable year any passive activity loss. Sec. 469(a). A passive activity loss is defined as the excess of the aggregate losses from all passive activities for the taxable year over the aggregate income from all passive activities for that year. Sec. 469(d)(1). A passive activity is any trade or business in which the taxpayer does not materially participate. Sec. 469(c)(1). Rental activity is treated as a per se passive activity regardless of whether the taxpayer materially participates. Sec. 469(c)(2), (4). Under section 469(c)(7)(B), the rental activities of a taxpayer in the real property business (real estate professional) are not per se passive activities under section 469(c)(2), but are treated as a trade or business and subject to the material participation requirement of section 469(c)(1). See also sec. 1.469-9(e)(1), Income Tax Regs. Real Estate Professional Petitioners assert that they are entitled to deduct their rental losses in 1997 and that such losses are not subject to the passive activity loss limitations under section 469. Petitioners contend that petitioner qualifies as a real estate professional under section 469(c)(7) for 1997, and, thus, their rentalPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011