Bruce and Judy Bailey - Page 10

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          participated in the activity.  Sec. 1.469-9(e)(1), Income Tax               
               For purposes of determining whether a taxpayer is a real               
          estate professional, a taxpayer’s material participation is                 
          determined separately with respect to each rental property,                 
          unless the taxpayer makes an election to treat all interests in             
          rental real estate as a single rental real estate activity.  Sec.           
          469(c)(7)(A); sec. 1.469-9(e)(1), Income Tax Regs.  Here,                   
          petitioners made an election in 1994 to treat their rental                  
          properties as a single activity.  According to section 1.469-               
          9(g)(1), Income Tax Regs., this election is binding for the                 
          taxable year in which it is made and, unless duly revoked by the            
          taxpayer, for all future years in which the taxpayer is a real              
          estate professional, even if there are intervening years in which           
          the taxpayer is not a real estate professional.                             
               Whether petitioner qualifies as a real estate professional             
          under section 469(c)(7) is based on petitioner’s activities                 
          related to the Indian Wells condominium, Indian Wells unit, and             
          Elderwood properties.  Petitioners argue that the Lake Arrowhead            
          property is rental real estate that should be included in                   
          determining whether petitioner is a real estate professional.  We           
               Petitioner’s activities that are related to the Lake                   
          Arrowhead property are disregarded for purposes of determining              

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Last modified: May 25, 2011