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rental real estate activity is not a passive activity for the
1999 and 2000 taxable years.
The term “real property trade or business” means any real
property development, redevelopment, construction,
reconstruction, acquisition, conversion, rental, operation,
management, leasing, or brokerage trade or business. Sec.
469(c)(7)(C). A taxpayer may elect to treat all interests in
rental real estate as one activity. Sec. 469(c)(7)(A); sec.
1.469-9(g)(1), Income Tax Regs. Such election is made by filing
a statement with the taxpayer’s original income tax return for
the taxable year. Sec. 1.469-9(g)(3), Income Tax Regs.
To qualify for the election, the taxpayer must satisfy two
requirements. First, more than one-half of the personal services
performed in trades or businesses by the taxpayer during such
taxable year must be performed in real property trades or
businesses in which the taxpayer materially participates. Sec.
469(c)(7)(B)(i). Second, such taxpayer must perform more than
750 hours of services during the taxable year in real property
trades or businesses in which the taxpayer materially
participates. Sec. 469(c)(7)(B)(ii). In the case of a joint
return, both requirements must be satisfied by the same spouse.
Sec. 469(c)(7)(B).
Under both requirements, a taxpayer must materially
participate in a real property trade or business in order for the
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Last modified: May 25, 2011