- 15 - Lake Arrowhead Property Respondent maintains that petitioners are not entitled to deduct losses generated from their Lake Arrowhead property in 1996 and 1997, because the Lake Arrowhead property is real estate held in a trade or business subject to section 469(c)(1), rather than a rental activity under section 469(c)(2), and petitioners have not established that they materially participated in the trade or business of renting their Lake Arrowhead property as required by section 469(c)(1)(B). Petitioners argue that they properly filed an election pursuant to section 469(c)(7)(A)(ii) to treat all of their interests in rental real estate as a single rental real estate activity and that their activities related to the rental of their Lake Arrowhead property should be considered in aggregate with their other rental properties. As previously explained, petitioners’ argument fails because the election to treat all rental properties as one activity is limited to the purpose of determining whether a taxpayer is a real estate professional under section 469(c)(7). Here, the average period of use of the Lake Arrowhead property was less than 7 days in 1996 and 1997; thus, the rental of the Lake Arrowhead property is not a rental activity as defined in section 469(j)(8) and is not a passive activity under section 469(c)(2). See Scheiner v. Commissioner, supra; Mordkin v. Commissioner, supra. Nevertheless,Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011