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Whether a person meets the material participation
requirement of section 469 is a factual determination. The
Reg. 1.469-5T(f)(2)(ii) defines investors’ activities that
are not considered in meeting the hourly requirement.
Simply signing a statement or making an election are not a
means in meeting the requirement. Although Section 469 may
not have existed at the time of your initial investment, it
is law that investors have to address in claiming investment
losses today. Contrary to Mr. Hoyt’s statement, time spent
reading and thinking about this issue should not be
considered as material participation hours for 1992.
If this letter is somewhat confusing or you are
questioning the accuracy of this letter, I recommend you
consider having an independent accountant or attorney review
this matter with you.
In addition to the above correspondence, petitioners received a
letter dated February 3, 1992 that informed them that respondent
was beginning an examination of DSBS 87-C with respect to its
taxable year ending in 1990. When petitioners received any
correspondence from respondent, petitioners would mail or fax
copies to the Hoyt organization, but they would take no further
action, and they sought no advice concerning the information that
they were receiving from respondent.
Petitioners filed a joint Federal income tax return for
taxable year 1991, the year in issue, reporting the following:
Wage income $51,362
Interest income 71
State tax refunds 1,433
Loss from DSBS 87-C (45,510)
Farm income 22,199
IRA contribution (2,000)
Self-employment tax deduction (240)
Adjusted gross income 27,315
Tax liability 1,798
Overpayment 2,471
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