-47-
B. Aggregation
Petitioners argue that section 465(c)(2)(B)(i) allows LCL to
aggregate its 1998, 1999, and 2000 activities into a single
activity for purposes of the at-risk rules of section 465. (The
relevant provisions of section 465(c) are set forth in an
appendix to this Opinion.) Petitioners argue that section
1.465-1T, Temporary Income Tax Regs., 50 Fed. Reg. 6014 (Mar. 11,
1985), interprets section 465(c)(2)(B)(i) to the contrary and
assert that these regulations are invalid as inconsistent with
the statute. Respondent argues that the referenced regulations
preclude LCL from aggregating one year’s leasing activities with
another year’s leasing activities and asserts that the referenced
regulations are consistent with section 465(c)(2)(B)(i). We
agree with respondent that section 465(c)(2)(B)(i) does not allow
for the aggregation desired by petitioners. Because we do not
read the referenced regulations to address the issue at hand, we
do not discuss them further.
Section 465(c)(2)(A)(ii) generally provides that a taxpayer
may not aggregate its equipment leasing activities for purposes
of the at-risk rules. An exception is found, however, in the
case of partnerships and S corporations. Under this exception,
all activities of a partnership or S corporation with respect to
section 1245 properties are considered to be a single activity to
the extent that the “properties are leased or held for lease, and
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