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public accountant. Miller discussed with petitioner the
qualifications and definition of a real estate professional for
purposes of section 469(c)(7), and he inquired about petitioner’s
involvement in United Air Temp and petitioners’ involvement in
their real estate rental activities. Form 8275-R, Regulation
Disclosure Statement, was prepared and filed with petitioners’
1994 Federal income tax return to disclose that petitioners were
taking a position inconsistent with that of the Internal Revenue
Service with regard to interest paid on tax deficiencies.
OPINION
Rental Properties
The deductibility of the losses from petitioners’ rental
properties depends on: (1) Whether petitioner qualifies as a
real estate professional under section 469(c)(7) and, if so,
(2) whether petitioner materially participated in each rental
activity.
Section 469 generally disallows for the taxable year any
passive activity loss. Sec. 469(a). A passive activity loss is
defined as the excess of the aggregate losses from all passive
activities for the taxable year over the aggregate income from
all passive activities for that year. Sec. 469(d)(1). A passive
activity is any trade or business in which the taxpayer does not
materially participate. Sec. 469(c)(1). Rental activity is
treated as a per se passive activity regardless of whether the
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Last modified: May 25, 2011