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Commissioner, T.C. Memo. 1999-301, affd. 225 F.3d 103 (1st Cir.
2000). The Courts of Appeals for the First, Fifth, and Seventh
Circuits have also upheld the validity of section 1.469-2(f)(6),
Income Tax Regs. See Krukowski v. Commissioner, 279 F.3d 547
(7th Cir. 2002); Sidell v. Commissioner, 225 F.3d 103 (1st Cir.
2000); Fransen v. United States, 191 F.3d 599 (5th Cir. 1999).
Section 1.469-2(f)(6), Income Tax Regs., explicitly
recharacterizes net rental activity income from an “item of
property” rather than net income from the entire rental
“activity”. Both section 469 and the regulations thereunder
clearly distinguish between net income from an “item of property”
and net income from the entire “activity”,8 which might include
rental income from multiple items of property.9 Under the
authority of section 469(l)(2), the Secretary could have
8Sec. 469(l)(2) authorizes the implementation of regulations
to remove “certain items of gross income” from the determination
of income from an “activity”. The designation of an “[item] of
gross income” to be removed from such a determination is narrower
than and distinct from the term “activity” income (from which the
item must be removed). Since sec. 1.469-2(f)(6), Income Tax
Regs., designates “net rental activity income for the year from
* * * [an] item of property” as the item of gross income to be
removed pursuant to sec. 469(l)(2) from the determination of
income from the “activity”, net rental activity income from an
“item” of property is also narrower than and distinct from the
broader term “activity” income.
9The fact that multiple rentals may be grouped together
pursuant to sec. 1.469-4(c), Income Tax Regs., to make up a
single “activity” further evidences the distinction between net
income from an “item” of property and net income from the entire
“activity”.
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