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paragraph (e)(3)(vii) of that section if the property is provided
for use in an activity conducted by a partnership, S corporation,
or joint venture in which the taxpayer owns an interest. The
short answer is that petitioner did not provide property to VBR.
Petitioner leased property to VBR.
Petitioner contends that he had an agency, not a lease,
relationship with VBR and that VBR should be regarded as the
lessors of the equipment. The evidence suggests to the contrary.
In light of the form of the written lease agreement, under Ohio
law the arrangement between petitioner and VBR with respect to
petitioner’s equipment constituted a lease from petitioner to
VBR. Ohio Rev. Code Ann. sec. 1310.01(A)(10) (Anderson 2001)
(“‘Lease’” means a transfer of the right to possession and use of
goods for a term in return for consideration.”); Hairston v.
Commissioner, T.C. Memo. 2000-386.
The equipment was provided by petitioner to VBR in his
capacity as a lessor and not a shareholder. Accordingly, we hold
that the exception to the characterization of a rental activity
as a passive activity found in the regulation above is not
applicable in this case.
In the alternative, petitioner contends that if he was
engaged in a rental activity during the taxable years in issue
for purposes of the passive activity loss limitations, then he is
entitled to group the loss from his rental activity with his
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Last modified: May 25, 2011