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exception will either be met or not by the services performed by
the brothers themselves--both filed joint returns, but their
wives did no work in the real estate business. And there is
likewise no dispute that Lee Brothers Investments and their other
properties qualify as a “real property trade or business”--
renting to tenants is included in the statutory definition of the
term. See sec. 469(c)(7)(C). Finally, we assume that both the
brothers Lee were “material participants” in their real estate
ventures.
That distills the case into one that turns on a single issue
--whether or not each Lee brother worked more than half his total
time providing “personal services performed in trades or
businesses” on their real estate business.
The burden of proof on this issue lies with the Lees.2 The
method of proof, set out in section 1.469-5T(f)(4), Temporary
Income Tax Regs., 53 Fed. Reg. 5727 (Feb. 25, 1988), is quite
lenient, letting taxpayers prove their time spent by “any
reasonable means.” Reasonable means are not limited to
“Contemporaneous daily time reports, logs, or similar documents,”
2 The Lees argued that the burden of proof should be shifted
to the Commissioner under section 7491. We find, however, that
they failed to cooperate fully with the IRS during the audit and
IRS appeals process by failing to cooperate with the IRS’s
reasonable requests for information, interviews, and documents.
See sec. 7491(a)(2)(B). We also decide this case after weighing
the evidence, using a preponderance-of-the-evidence standard, not
on the basis of the initial allocation of proof.
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