Bruce and Judy Bailey - Page 19

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          v. Commissioner, T.C. Memo. 1997-331; Speer v. Commissioner, T.C.           
          Memo. 1996-323; Goshorn v. Commissioner, T.C. Memo. 1993-578.               
               Even if such hours were accurate, petitioners would not meet           
          any of the material participation tests.  Petitioners have not              
          spent more than 500 hours in the activity.  Petitioner’s                    
          commission agreement with Mountain Country to manage the rental             
          of the Lake Arrowhead property would preclude petitioners’                  
          activities from being substantially all of the participation in             
          the activity.  Petitioners have not presented evidence to                   
          establish that the participation by Mountain Country did not                
          exceed petitioners’ participation. Petitioners have not presented           
          evidence of their material participation in the Lake Arrowhead              
          property for 5 of the prior 10 years.                                       
               Petitioners also fail the facts and circumstances test based           
          on petitioner’s commission agreement with Mountain Country to               
          operate the rental of their Lake Arrowhead property.  The realty            
          company found tenants, showed the property, collected rents, and            
          paid for repairs.  See Barniskis v. Commissioner, T.C. Memo.                
          1999-258 (taxpayers did not materially participate where                    
          taxpayers utilized a management company to handle the rental of             
          their resort condominium); Chapin v. Commissioner, T.C. Memo.               
          1996-56 (taxpayers’ participation did not constitute                        
          participation on a regular, continuous, and substantial basis               
          where taxpayers used a rental agent to handle all leasing                   

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