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any trade or business and in which the taxpayer does not
materially participate. Sec. 469(c)(1). For purposes of section
469(c)(1), the term “trade or business” is defined in section
469(c)(6) to include any activity in connection with a trade or
business or any activity with respect to which expenses are
allowable as a deduction under section 212.
Section 469(h)(1) provides that generally an individual is
to be treated as materially participating in an activity only if
such individual is involved in the operations of the activity on
a basis that is regular, continuous, and substantial. Congress
expressly authorized the Secretary of the Treasury to prescribe
such regulations as may be necessary or appropriate to carry out
the provisions of section 469, including regulations that specify
“what constitutes * * * material participation”. Sec. 469(l)(1).
Both temporary and final regulations relating to the meaning
of the terms “participation” and “material participation” have
been promulgated under section 469. With respect to the term
“participation”, final regulations issued under section 469
provide that generally
any work done by an individual (without regard to the
capacity in which the individual does the work) in
connection with an activity in which the individual
owns an interest at the time the work is done shall be
treated for purposes of this section as participation
of the individual in the activity. [Sec. 1.469-
5(f)(1), Income Tax Regs.]
Temporary regulations issued under section 469 provide certain
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