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taxpayer may not regroup those activities in subsequent taxable
years”. Respondent also explains that petitioner is unable to
group his real estate rental activities with his airplane
activity because, under section 1.469-4(d)(2), Income Tax Regs.,
an “activity involving the rental of real property and an
activity involving the rental of personal property * * * may not
be treated as a single activity”. We agree with respondent.
Material Participation in Shaw Ltd.
Respondent reclassified the income and loss from
petitioner’s Schedule E ownership interests from nonpassive to
passive activities and disallowed the net passive loss of $59,959
and $34,394 in 1995 and 1996, respectively, pursuant to section
469:
Entity 1995 1996
RS&M $29,814 $29,814
R&S 27,869 25,236
SDQ LLC 21,981 19,247
Shaw Ltd. (139,623) (108,691)
Net passive income/(loss) $(59,959) $(34,394)
The effect of respondent’s reclassification was to disallow
a portion of the losses from Shaw Ltd. Petitioner can deduct the
losses from his ownership interest in Shaw Ltd. of $139,623 and
$108,691 in 1995 and 1996, respectively, if petitioner can
demonstrate that he materially participated in Shaw Ltd. during
1995 or 1996.
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