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• Participation in the activity for more than 100 hours,
and a showing that no other individual participated in
the activity more than the taxpayer. Sec. 1.469-
5T(a)(3), Temporary Income Tax Regs., supra;
• Participation in the activity for more than 100 hours,
plus participation in all significant trade or business
activities that totals 500 hours. Sec. 1.469-5T(a)(4),
Temporary Income Tax Regs., supra; and
• Participation in the activity on a regular, continuous,
and substantial basis during the year. Sec. 1.469-
5T(a)(7), Temporary Income Tax Regs., supra.
This last test is the one that most closely follows the
language of section 469(h)(1). However, in Mordkin v.
Commissioner, T.C. Memo. 1996-187, we concluded that section
469's material participation standard implied that materiality
could be measured by time spent. We thus upheld the Secretary’s
decision to build safe harbors letting taxpayers prove material
participation by showing they spent a particular number of hours
on a particular activity. Id.
It is not obvious, though, whether a taxpayer in the Lapids’
situation has to treat each property as a separate activity when
arguing that he has spent the required number of hours
participating “in the activity.” So we first ask whether the
Lapids’ four hotel condos were four activities or only one, or
something in between.2
2 The regulations make clear that taxpayers generally cannot
combine trade or business activities with rental activities.
Sec. 1.469-4(d)(1), Income Tax Regs. As the hotel condos are
trade or business activities and the nonhotel properties are
rental activities, we cannot combine them to measure whether Mrs.
(continued...)
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Last modified: May 25, 2011