- 16 -
carried his burden of establishing error in respondent’s
determinations with respect to the two issues that remain in this
case.
Chicken Bar
Respondent determined to disallow $19,212 of the $19,412
loss that petitioner claimed with respect to Chicken Bar on the
ground that respondent determined that petitioner did not
materially participate in the Chicken Bar business within the
meaning of section 469(h)(1). Petitioner disagrees with
respondent’s determination. Before turning to the specific
contentions of the parties in support of their respective
positions, we shall set forth the general framework of section
469 and the regulations thereunder.
Pursuant to section 469(a), a passive activity loss of an
individual for the taxable year is generally not allowed as a
deduction for such year.16 For this purpose, the passive
activity loss for the taxable year is generally the amount, if
any, by which the passive activity deductions for the taxable
year exceed the passive activity gross income for such year.
Sec. 469(d)(1).
As pertinent here, section 469(c) defines the term “passive
activity” to include any activity which involves the conduct of
16A disallowed passive activity loss for a taxable year is
generally treated as a deduction allocable to a passive activity
for the next year. Sec. 469(b).
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