- 4 - $23,387, and $22,160. Each of the other five rental properties reported a net loss such that the combined losses of the five properties in each year exceeded the net income from the office. OPINION Respondent determined that the Beechers’ net income from their rental of the office was nonpassive income under the recharacterization rule of section 1.469-2(f)(6), Income Tax Regs.,2 because the Beechers materially participated in the business activity of the lessees; i.e., the corporations. Thus, respondent determined, the net income from the office could not be offset by any of the losses from the other rental properties. Petitioners do not dispute respondent’s determination that the recharacterization rule on its face treats the net income from the office as nonpassive. Nor do they dispute respondent’s determination that the recharacterization rule on its face, as applied to them, precludes them from offsetting the net income of 2 The recharacterization rule of sec. 1.469-2(f)(6), Income Tax Regs., provides: (f)(6) Property rented to a nonpassive activity. An amount of the taxpayer’s gross rental activity income for the taxable year from an item of property equal to the net rental activity income for the year from that item of property is treated as not from a passive activity if the property-- (i) Is rented for use in a trade or business activity * * * in which the taxpayer materially participates (within the meaning of sec. 1.469-5T) for the taxable year; * * *Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011