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compensated for performing management services related to that
property. Sec. 1.469-5T(b)(2)(ii)(A), Temporary Income Tax
Regs., supra at 5726. The record before us, however, contains
reams of evidence showing that the hotels withheld some of the
Lapids’ revenues as payment for providing services such as
cleaning, check-ins, and the like. So even if Mrs. Lapid did
substantially manage the hotel properties, this catchall test
provides no benefit to her.
For these reasons, we must find that the petitioners did not
materially participate in the trade or business of the hotel
condos. These activities were passive, and so we reject
petitioners’ challenge to the disallowance of their related loss
deduction.
B. The Nonhotel Properties
The nonhotel condo and Nevada house are both rental
activities rather than a trade or business, so we must analyze
whether they are passive activities under section 469(c)(2). The
material participation standard ordinarily does not apply to
rental activities. Sec. 469(c)(2). But it does become relevant
when petitioners argue that one of them is a “real estate
professional.”
Petitioners did submit a proposed amended tax return that
changed Mrs. Lapid’s occupation from “R.N.” to “Real Estate
Manager.” They failed to raise the point in their briefs,
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