Sidney C. Shaw - Page 21




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          Rental Activities                                                           
               Petitioner reported his property rentals as nonpassive                 
          activities during the years in issue based on the assumption that           
          he qualified as a real estate professional under section                    
          469(c)(7).  Respondent determined that petitioner was not a real            
          estate professional and reclassified petitioner’s rental                    
          activities as passive activities.                                           
               Respondent also determined that the properties leased to               
          Shaw’s Gulf and C&A Trucking were self-rented properties pursuant           
          to section 1.469-2(f)(6), Income Tax Regs.  The self-rented                 
          property rule contained in section 1.469-2(f)(6), Income Tax                
          Regs., states:                                                              
               Property rented to a nonpassive activity.  An amount of                
               the taxpayer’s gross rental activity income for the                    
               taxable year from an item of property equal to the net                 
               rental activity income for the year from that item of                  
               property is treated as not from a passive activity if                  
               the property–-                                                         
                    (i) Is rented for use in a trade or business                      
               activity * * * in which the taxpayer materially                        
               participates * * * for the taxable year * * * [Emphasis                
               added.]                                                                
          Under the self-rented property rule, the net rental income from             
          self-rented property is treated as nonpassive income and the net            
          rental losses are treated as passive losses, even though the                
          rental activities are passive activities.  Respondent                       
          reclassified the net rental income from the following properties            
          as nonpassive:                                                              






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