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activities if the taxpayer is a qualifying taxpayer under section
469(c)(7). See sec. 1.469-9(e)(1), Income Tax Regs. Instead,
the rental real estate activity of a qualifying taxpayer who
materially participates in the activity is not subject to the
passive activity rules of section 469. Sec. 469(c)(7); sec.
1.469-9(e)(1), Income Tax Regs. A qualifying taxpayer must meet
the following requirements under section 469(c)(7)(B):
(i) more than one-half of the personal services
performed in trades or businesses by the taxpayer
during such taxable year are performed in real
property trades or businesses in which the
taxpayer materially participates, and
(ii) such taxpayer performs more than 750 hours of
services during the taxable year in real property
trades or businesses in which the taxpayer
materially participates.
A taxpayer is considered to materially participate in a
trade or business if his activities are regular, continuous, and
substantial. Sec. 469(h)(1). In establishing whether a
taxpayer's real property activities result in passive activity
losses, each interest in rental real estate is treated as a
separate rental real estate activity unless the qualifying
taxpayer makes an election to treat all interests in rental real
estate as a single rental real estate activity. Sec.
469(c)(7)(A); sec. 1.469-9(e)(1), Income Tax Regs. Petitioners
did not make such a timely election, so petitioner's activities
must be regular, continuous, and substantial with regard to each
individual rental property.
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Last modified: May 25, 2011