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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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