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employment tax provisions, the term “trade or business” generally
has the same meaning as used in section 162. Sec. 1402(c).
The Supreme Court in Commissioner v. Groetzinger, 480 U.S.
23, 35 (1987), defined a “trade or business” as a regular and
continual activity engaged in with the purpose of earning income
or profit.
It is often difficult to distinguish between a passive
investment and a trade or business. Although passive ownership
of rental property does not constitute a trade or business,
active management of rental property does constitute a trade or
business. McCoach v. Minehill & Schuylkill Haven R.R. Co., 228
U.S. 295, 303 (1913); Drobny v. Commissioner, 86 T.C. 1326, 1343
(1986), affd. 113 F.3d 670 (7th Cir. 1997); Neill v.
Commissioner, 46 B.T.A. 197, 198 (1942).
Petitioners argue that Lucky was merely a passive owner of
the Keno lottery equipment, that Lucky leased the Keno lottery
equipment to the site organizations, and that Lucky played no
part in the management and operation of the actual Keno lotteries
at the lottery sites. We disagree.
Petitioners oversimplify the role of Lucky in the Keno
lotteries. The lotteries occurred primarily because of the
contracts Lucky entered into with the various municipalities
under which Lucky was to conduct and operate the lotteries. The
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