- 8 -
(5) interdependencies between the activities. Sec. 1.469-
4(c)(2), Income Tax Regs. Taxpayers may use “any reasonable
method of applying the relevant facts and circumstances in
grouping activities.” Id. However, there are limitations
imposed on taxpayers’ ability to group certain activities. Sec.
1.469-4(d), Income Tax Regs. The limitation applicable to the
case at hand provides:
(1) Grouping rental activities with other trade or
business activities--
(i) Rule. A rental activity may not be
grouped with a trade or business activity unless
the activities being grouped together constitute
an appropriate economic unit under paragraph (c)
of this section and--
(A) The rental activity is insubstantial
in relation to the trade or business
activity;
(B) The trade or business activity is
insubstantial in relation to the rental
activity; or
(C) Each owner of the trade or business
activity has the same proportionate ownership
interest in the rental activity, in which
case the portion of the rental activity that
involves the rental of items of property for
use in the trade or business activity may be
grouped with the trade or business activity.
Sec. 1.469-4(d)(1), Income Tax Regs. The regulations do not
define the term “insubstantial”.
The dispute in this case has been narrowly drawn by the
parties: The sole issue we must decide is whether the leasing
activity is insubstantial in relation to the PFC activity within
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011