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The regulations guide us by listing five factors:
(i) Similarities and differences in types of trades or
businesses;
(ii) The extent of common control;
(iii) The extent of common ownership;
(iv) Geographical location; and
(v) Interdependencies between or among the activities
* * * [Sec. 1.469-4(c)(2), Income Tax Regs., supra.]
Petitioners’ hotel condos are all part of a similar trade or
business, are owned by the same people, and are all near each
other in Florida. Even though there does not seem to be much
interdependence between them, we assume that all four are one
activity.
The key problem in petitioners’ case, then, is whether they
can prove that they spent the required number of hours
participating in the activity even if all the hotel condos
together are a single activity. The regulations state that
taxpayers can prove the extent of their activity through any
reasonable means. Sec. 1.469-5T(f)(4), Temporary Income Tax
Regs., supra at 5727. “Contemporaneous daily time reports, logs,
or similar documents are not required if the extent of such
participation may be established by other reasonable means.” Id.
2(...continued)
Lapid spent the time required to claim the benefit of the safe
harbors listed in the regulation.
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Last modified: May 25, 2011