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activities are exempt from being passive activities under section
469(c)(2).
Respondent’s position is that petitioners are not entitled
to deduct their rental losses in 1997 because their rental
activities are passive activities under section 469(c)(2).
Respondent maintains that petitioners have not presented adequate
evidence to support their assertion that petitioner was a real
estate professional pursuant to section 469(c)(7) in 1997.
Under section 469(c)(7)(B), a taxpayer qualifies as a real
estate professional and a rental real estate activity of the
taxpayer is not a passive activity under section 469(c)(2) if:
(i) more than one-half of the personal services
performed in trades or businesses by the taxpayer
during such taxable year are performed in real property
trades or businesses in which the taxpayer materially
participates, and
(ii) such taxpayer performs more than 750 hours of
services during the taxable year in real property
trades or businesses in which the taxpayer materially
participates.
In the case of a joint return, the above requirements are
satisfied if and only if either spouse separately satisfied these
requirements. Sec. 469(c)(7)(B). Thus, if either spouse
qualifies as a real estate professional, the rental activities of
the real estate professional are exempt from being a passive
activity under section 469(c)(2). Instead, the real estate
professional’s rental activities would be treated as a passive
activity under section 469(c)(1) unless the taxpayer materially
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