118 T.C. No. 17
UNITED STATES TAX COURT
DAVID H. AND SUZANNE HILLMAN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent*
Docket No. 19893-97. Filed April 9, 2002.
P’s S corporation (S) performed management
services for real estate partnerships in which P had
direct and indirect interests. P actively participated
in S by performing management services that S had
contracted to perform for the partnerships. P was not
an active participant in any of the partnerships. On
the Schedule K-1 issued to P from S, P’s portion of the
management income was reduced by the portion of the
corresponding management fee expense paid by the
partnerships to S in an amount proportionate to P’s
ownership percentage in each partnership. The
reduction from the management income was treated as a
loss from a trade or business. R disallowed the
management fee expense deductions on the grounds that
the expenses were passive within the meaning of sec.
469, I.R.C., and that P was not entitled to treat the
*This Opinion supplements a previously released opinion:
Hillman v. Commissioner, 114 T.C. 103 (2000).
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