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Whether a person meets the material participation
requirement of section 469 is a factual determination. The
Reg. 1.469-5T(f)(2)(ii) defines investors’ activities that
are not considered in meeting the hourly requirement.
Simply signing a statement or making an election are not a
means in meeting the requirement. Although Section 469 may
not have existed at the time of your initial investment, it
is law that investors have to address in claiming investment
losses today. Contrary to Mr. Hoyt’s statement, time spent
reading and thinking about this issue should not be
considered as material participation hours for 1992.
If this letter is somewhat confusing or you are
questioning the accuracy of this letter, I recommend you
consider having an independent accountant or attorney review
this matter with you.
Petitioners also received several notices informing them that
respondent was beginning an examination of various partnerships
in which petitioners had been involved. Petitioners received
such notices dated June 19, 1989, June 26, 1989, August 13, 1990,
January 28, 1991, February 19, 1991, May 13, 1991, February 3,
1992, and February 18, 1992. Finally, petitioners had been
notified by respondent by letter dated December 9, 1988, that
their 1987 individual income tax return had been selected for
examination prior to issuance of the requested refund; the refund
was subsequently issued on February 20, 1989.
In June 1992, petitioners completed their joint Federal
income tax return for their taxable year 1991. They reported the
following items of income and loss on this return:
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