Zacarias Lapid and Ma Delaila Lapid - Page 2

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          meaning of section 469.1  The case turns on whether the Lapids              
          were “material participants” in their various real estate                   
          ventures.                                                                   
                                     Background                                       
               The Lapids were Michigan residents when they filed their               
          petition.  Mrs. Lapid is a cardiac nurse on the graveyard shift             
          at a hospital in Troy, Michigan, and Mr. Lapid is a machinist at            
          an engineering company there.  They both work exceptionally long            
          hours.  Throughout 1999 and 2000, Mr. Lapid averaged between 9 to           
          10 hours a day and Mrs. Lapid worked 12 hours a night.  Their               
          work paid off, and they saved enough money to become investors.             
               By 1999, the Lapids owned five condominiums in Florida.                
          Four were units in two different condominium hotels near                    
          Orlando--a Day’s Inn and a Howard Johnson.  Condominium hotels              
          look like any other hotel.  Guests check in, get a room, have               
          full run of the hotel, and then check out.  The hotels have                 
          people manning the front desk, and others working as housekeepers           
          and janitors.  The major difference between condominium and                 
          regular hotels is that each room in a condo hotel is owned by an            
          investor who typically is not affiliated with the hotel’s                   
          management company.  The brand name on the hotel (e.g., Day’s               
          Inn, Howard Johnson), is the management company’s, not the                  


               1 Section references are to the Internal Revenue Code of               
          1986, as amended.                                                           





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