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taxpayer materially participates. Sec. 469(c)(2), (4). Under
section 469(c)(7)(B), the rental activities of a taxpayer in the
real property business (real estate professional) are not per se
passive activities under section 469(c)(2) but are treated as a
trade or business and subject to the material participation
requirements of section 469(c)(1). Sec. 1.469-9(e)(1), Income
Tax Regs.
Petitioners argue that they are entitled to deduct their
losses from their real estate rental properties because
petitioner qualifies as a real estate professional under section
469(c)(7) and that the real estate rental activities are a trade
or business in which petitioner and Mrs. Fowler materially
participated.
Respondent maintains that the real estate rental activities
generating a net loss are per se passive activities under section
469(c)(2) because petitioner has not presented adequate evidence
to support his assertion that he was a real estate professional
pursuant to section 469(c)(7) in either 1994 or 1995 or to
support a finding that he and Mrs. Fowler materially participated
in each of the real estate activities.
Under section 469(c)(7)(B), a taxpayer qualifies as a real
estate professional and is not engaged in a passive activity
under section 469(c)(2) if:
(i) more than one-half of the personal services
performed in trades or businesses by the taxpayer
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