Bruce and Judy Bailey - Page 17




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               who are not owners of interests in the activity) for                   
               such year;                                                             
               (4) The activity is a significant participation                        
               activity * * * for the taxable year, and the                           
               individual’s aggregate participation in all significant                
               participation activities during the year exceeds 500                   
               hours;                                                                 
               (5) The individual materially participated in the                      
               activity * * * for any five taxable years (whether or                  
               not consecutive) during the ten taxable years that                     
               immediately precede the taxable year;                                  
               (6) The activity is a personal service activity * * *,                 
               and the individual materially participated in the                      
               activity for any three tax years (whether or not                       
               consecutive) preceding the taxable year; or                            
               (7) Based on all facts and circumstances * * *, the                    
               individual participates in the activity on a regular,                  
               continuous, and substantial basis during such year.                    
               “Participation” generally means “all work done in an                   
          activity by an individual who owns an interest in the activity”.            
          Sec. 1.469-5T(f), Temporary Income Tax Regs., 53 Fed. Reg. 5697             
          (Feb. 25, 1988).  Work done by an individual in the individual’s            
          capacity as an investor in an activity is not generally treated             
          as participation in the activity.  Sec. 1.469-5T(f)(2)(ii)(A),              
          Temporary Income Tax Regs., supra.  Additionally, work done by              
          the individual is not treated as participation in the activity if           
          such work is not of a type that is customarily done by an owner             
          of such activity and one of the principal purposes for performing           
          such work is to avoid the passive activity limitations of section           
          469.  Sec. 1.469-5T(f)(2)(i), Temporary Income Tax Regs., supra.            







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