- 15 -
Highland for purposes of section 1.469-1T(e)(3)(vi)(C), Temporary
Income Tax Regs., 53 Fed. Reg. 5703 (Feb. 25, 1988).
We hold that petitioners are entitled to treat their leasing
activity as incidental to Highland’s trade or business activities
under section 1.469-1T(e)(3)(vi)(C), Temporary Income Tax Regs.,
53 Fed. Reg. 5703 (Feb. 25, 1988). Consequently, petitioners’
leasing activity is not classified as a rental activity. Sec.
1.469-1T(e)(3)(ii)(D), Temporary Income Tax Regs., 53 Fed. Reg.
5703 (Feb. 25, 1988).
The passive loss limitations of section 469 still apply to
petitioners unless they meet the material participation standard.
Sec. 469(c)(1). The regulations permit a taxpayer to group an
activity conducted through a C corporation subject to section 469
with another activity of the taxpayer for purposes of determining
whether the taxpayer materially or significantly participates in
the other activity. Sec. 1.469-4(d)(5)(ii), Income Tax Regs.
Since petitioners conducted an activity through a C corporation
subject to section 469,6 petitioners are entitled to group their
6The passive loss limitations of sec. 469 apply only to
individuals, estates, trusts, closely held C corporations, and
personal service corporations. Sec. 469(a)(2). A closely held C
corporation, for purposes of sec. 469(a)(2), is defined as any
corporation in which more than 50 percent in value of its
outstanding stock is owned, directly or indirectly, by or for not
more than five individuals at any time during the last half of
the taxable year. Secs. 469(j)(1), 465(a)(1)(B), 542(a)(2).
Since all of the stock of Highland, a C corporation, was owned
directly by two individuals during the year in issue, Highland is
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011