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property. Petitioners contend that they filed such an election
for 1997.
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
generally treated as a per se passive activity regardless of
whether the taxpayer materially participates. Sec. 469(c)(2),
(4). However, under section 469(c)(7), the rental activities of
a taxpayer in the real property business, i.e., a real estate
professional, are not per se passive activities under section
469(c)(2). Rather, the rental activities of a real estate
professional 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.
A taxpayer qualifies as a real estate professional and
therefore is not engaged in a per se passive activity pursuant to
section 469(c)(2), if:
(i) more than one-half of the personal services
performed in trades or businesses by the taxpayer during
such taxable year are performed in real property trades or
businesses in which the taxpayer materially participates,
and
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