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consisted of investor type activities that are not treated as
participation in an activity.
With respect to the evidence that may be used to establish
hours of participation, section 1.469-5T(f)(4), Temporary Income
Tax Regs., 53 Fed. Reg. 5727 (Feb. 25, 1988), provides:
The extent of an individual’s participation in an
activity may be established by any reasonable means.
Contemporaneous daily time reports, logs, or similar
documents are not required if the extent of such
participation may be established by other reasonable
means. Reasonable means for purposes of this paragraph
may include but are not limited to the identification
of services performed over a period of time and the
approximate number of hours spent performing such
services during such period, based on appointment
books, calendars, or narrative summaries.
While the regulations are somewhat ambiguous concerning the
records to be maintained by taxpayers, they do not allow a
postevent “ballpark guesstimate”. Carlstedt v. Commissioner,
T.C. Memo. 1997-331; Speer v. Commissioner, T.C. Memo. 1996-323;
Goshorn v. Commissioner, T.C. Memo. 1993-578. Petitioner’s
recollection and estimate of the hours that he participated in
Shaw Ltd. are reasonable and are corroborated by the testimony of
Webb and Palmer. However, based on the description of the
activities that petitioner performed, the hours that are related
to investor type activities such as monitoring the operations and
reviewing financial statements are not treated as participation
because petitioner was not involved in the day-to-day operations
of the restaurants. Rather, the day-to-day operations of the
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