- 9 -
does not materially participate. Rental activity is generally
considered a passive activity. See sec. 469(c)(2).
The Secretary, however, is expressly authorized to prescribe
regulations necessary or appropriate to carry out the provisions
of section 469, including regulations “which specify what
constitutes an activity, material participation, or active
participation” and “requiring net income or gain from a limited
partnership or other passive activity to be treated as not from a
passive activity”. Sec. 469(l)(1), (3). Pursuant to this
authority, section 1.469-2(f)(6), Income Tax Regs.,
recharacterizes a taxpayer’s rental income from property rented
for use in a trade or business in which the taxpayer materially
participates as income not from a passive activity.4 Section
1.469-11(c)(1)(ii), Income Tax Regs., however, excludes “the
portion of the income (if any) that is attributable to the
4 The regulation, in relevant part, provides:
(f)(6) Property rented to a nonpassive activity.
An amount of the taxpayer’s gross rental activity
income for the taxable year from an item of property
equal to the net rental activity income for the year
from that item of property is treated as not from a
passive activity if the property–
(i) Is rented for use in a trade or business
activity * * * in which the taxpayer materially
participates (within the meaning of � 1.469-5T)
for the taxable year * * *[Sec. 1.469-2(f)(6),
Income Tax Regs.]
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011