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the assets does not take into account the value of equipment that
PFC leased from parties other than petitioner but that was
instrumental to PFC’s operations.
We find that, in ascertaining whether the leasing activity
was insubstantial in relation to the PFC activity, the most
significant fact in this case is that petitioner created and
operated the leasing activity solely for PFC’s benefit. In
furtherance of this goal, petitioner spent very little time
conducting the affairs of the leasing activity in comparison with
the very substantial amount of time and effort expended by
petitioner in carrying on PFC’s business. The leasing activity
was intended to, and in fact did, provide a service solely to
PFC. Its purpose was to enhance PFC’s ability to generate
business, maintain PFC’s viability as an ongoing concern, and
possibly enable PFC to become profitable in the future, not to
provide an income stream independently from PFC. Consistent with
this purpose, the leasing activity had gross receipts of $9,500
in 1998 and $34,940 in 1999, compared to PFC’s gross receipts and
other income of $804,492 and $1,092,295 in each respective year.
Based on the record in this case, we find that petitioner’s
leasing activity was insubstantial in relation to the PFC
activity. Accordingly, we do not sustain respondent’s
determination that the leasing activity was a passive activity
subject to the provisions of section 469.
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