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during such taxable year are performed in real property
trades or businesses in which the taxpayer materially
participates, and
(ii) such taxpayer performs more than 750 hours of
services during the taxable year in real property
trades or businesses in which the taxpayer materially
participates.
In the case of a joint return, the above requirements for
qualification as a real estate professional are satisfied if and
only if either spouse separately satisfied these requirements.
Sec. 469(c)(7)(B). Thus, if either spouse qualifies as a real
estate professional, the rental activities of the real estate
professional are not a per se passive activity under section
469(c)(2). Instead, the real estate professional’s rental
activities would be treated as a passive activity under section
469(c)(1) unless the taxpayer materially participated in the
activity.
Material participation is defined as involvement in the
operations of the activity that is regular, continuous, and
substantial. Sec. 469(h)(1). For purposes of determining
whether a taxpayer materially participated in a trade or
business, this requirement must be met with respect to each
interest in rental real estate unless the taxpayer makes an
election to treat all interests in rental real estate as a single
rental real estate activity. Sec. 469(c)(7)(A). Petitioner did
not make a timely election to treat all interests in rental real
estate as a single rental real estate activity. In determining
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Last modified: May 25, 2011