- 14 - activity that a taxpayer conducts through a C corporation subject to section 469 may be grouped with another activity of the taxpayer, but only for purposes of determining whether the taxpayer materially or significantly participates in the other activity.” (Emphasis added.) See sec. 1.469-5, Income Tax Regs. (regulations on what constitutes material participation). Since we find that petitioners are not excepted from the general definition of “rental activity,” we never ask the subsidiary question of whether petitioners materially participated in such nonrental activities. See sec. 469(c)(1); Tarakci v. Commissioner, T.C. Memo. 2000-358; Welch v. Commissioner, T.C. Memo. 1998-310 (“If petitioner establishes that the activity was not a rental activity, he then must establish that he materially participated in the activity to avoid the proscription of section 469."). 2. Accuracy-Related Penalty Respondent determined an accuracy-related penalty of $2,765 for 1991 based solely upon petitioners’ failure to report rental income.17 Prior to submission, petitioners conceded that they had unreported rental income of $55,000 in 1991 which should have been included on their Schedule E. Respondent’s determination is presumed correct, and the burden lies with petitioners to 17On brief, respondent states that he does not seek an increase in the amount of the penalty determined.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011