- 17 -
Petitioner therefore qualifies for the incidental rental
exception. See Tarakci v. Commissioner, T.C. Memo. 2000-358. We
now address one additional argument by respondent.
3. Whether Petitioner May Simultaneously Use the Equipment
in His Trade or Business and the Rental Activity
Respondent also argues that the incidental activity
exception does not apply here because the exception requires
petitioner to temporarily stop using the property in his trade or
business before using it in a rental activity. In essence,
respondent claims that the exception is not available when the
property is used in the leasing activity and the law firm
“simultaneously” and advances two main arguments in support of
that claim.
First, respondent argues that the regulation uses the past
tense when referring to the use of the property in the trade or
business. See sec. 1.469-1T(e)(3)(vi)(C)(2), Temporary Income
Tax Regs., supra. Respondent focuses on the word “was” in the
regulation to argue that the leased property cannot be used in a
rental and a nonrental activity simultaneously. We disagree.
We note that the word “was” in the regulation refers not
only to past years but also to the current taxable year. See
Philips Petroleum Co. v. Commissioner, 101 T.C. 78, 107 (1993)
(we apply a regulation according to its plain or ordinary
meaning), affd. without published opinion 70 F.3d 1282 (10th Cir.
1995). The incidental activity regulation requires, among other
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011