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of passive activity as non-passive. The phrase “or
other” appears to refer back to “limited partnership”
and thus to include any passive activity other than a
limited partnership.
The legislative history supports this view: it
provides examples of situations in which the Secretary
may treat activities defined as passive under � 469(c),
including rental activity, as non-passive. The report
includes these examples as illustrations rather than as
an exclusive list. See H.R. Conf. Rep. No. 99-841, at
147 (1986), reprinted in 1986 U.S.C.C.A.N. 4075, 4235.
The Fransens suggest that the regulation defeats
the statutory purpose of privileging rental income.
The statute, however, does not seek to privilege rental
income by generally classifying it as passive.
Instead, the purpose animating the statute is to
foreclose tax shelters. See STAFF OF THE JOINT COMM.
ON TAXATION, GENERAL EXPLANATION OF THE TAX REFORM ACT
OF 1986, 99th CONG., at 209-210 (J. Comm. Print 1987).
In most cases, a classification of income as passive
achieves this result. Tellingly, professional real
estate lessors sought and obtained an exception from
the passive designation in the 1993 amendments because
a non-passive classification would be more favorable to
them. See I.R.C. � 469(c)(7); Scott P. Greiner, The
Real Estate Professional’s Tax Relief Act of 1993, 23
COLO. LAW. 1317, 1318 (1994).
In some cases, however, the opposite is true: the
treatment of income as passive may create a shelter
opportunity. The inclusion of � 469(l) allows for such
situations by granting the IRS the authority to treat
income as non-passive. See H.R. Conf. Rep. No. 99-841,
at 147 (1986), reprinted in 1986 U.S.C.C.A.N. 4075,
4235. Here, the IRS identified self-rentals as such a
case and promulgated the regulation at issue.
See also Connor v. Commissioner, 218 F.3d at 738 (“the purpose of
the passive activity loss regulations * * * is to assess
accurately whether a taxpayer is involved in the active
management of a trade or business in such a fashion that passive
activity treatment would be inaccurate”). Although petitioners
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