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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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