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generally are those activities which involve the conduct of a
trade or business in which the taxpayer does not materially
participate. Sec. 469(c)(1). Rental activities generally are
presumptively passive, without regard to whether the taxpayer
materially participates in the activity. Sec. 469(c)(2), (4).
Subject to statutory and regulatory exceptions not applicable
here, a rental activity is “any activity where payments are
principally for the use of tangible property”. Sec. 469(j)(8).
Pursuant to the regulations issued under section 469,
certain activities may be grouped into a single activity for
purposes of ascertaining whether the resulting combined activity
is a passive activity under that section. The regulations state
the general rule that
One or more trade or business activities or rental
activities may be treated as a single activity if the
activities constitute an appropriate economic unit for the
measurement of gain or loss for purposes of section 469.
Sec. 1.469-4(c)(1), Income Tax Regs. A taxpayer who is a
shareholder of an S corporation may group the activity of that S
corporation with an activity conducted directly by the taxpayer.
Sec. 1.469-4(d)(5)(i), Income Tax Regs.
Whether activities constitute an “appropriate economic unit”
depends upon all the relevant facts and circumstances, giving the
greatest weight to (1) similarities and differences in the types
of trades or businesses, (2) the extent of common control, (3)
the extent of common ownership, (4) geographical location, and
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Last modified: May 25, 2011