Thomas E. and Susan L. Truskowsky - Page 10

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               Material Participation                                                 
               Section 469(h)(1) provides that generally an individual                
          shall be treated as materially participating in an activity only            
          if he or she is involved in the operations of the activity on a             
          basis that is "regular", "continuous", and "substantial".                   
          Congress directed the Secretary of the Treasury (Secretary) to              
          prescribe such regulations as may be necessary or appropriate to            
          carry out the provisions of section 469, including regulations              
          that specify what constitutes material participation.  Sec.                 
          469(l)(1).  Both temporary and final regulations relating to the            
          meaning of the terms "participation" and "material participation"           
          have been promulgated under section 469.                                    
               The term "participation" means generally "any work done by             
          an individual (without regard to the capacity in which the                  
          individual does the work) in connection with an activity in which           
          the individual owns an interest at the time the work is done".              
          Sec. 1.469-5(f)(1), Income Tax Regs.  Temporary regulations                 
          issued under section 469 provide certain exceptions to the                  
          definition of participation.  One particular provision, section             
          1.469-5T(f)(2)(ii), Temporary Income Tax Regs., 53 Fed. Reg. 5727           
          (Feb. 25, 1988), provides that work done by an individual in the            
          capacity of an investor in an activity shall not be treated as              
          participation by the individual in the activity unless the                  
          individual is involved in the day-to-day management or operations           






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