- 7 -
Petitioner concedes that he “materially participated” in the
conduct of the corporation during 2000, 2001, and 2002.
Furthermore, he acknowledges the application and validity of
section 1.469-2(f)(6), Income Tax Regs.4 He takes the position,
however, that he is entitled to relief from the consequences of
the recharacterization rule by virtue of the transitional rule
referenced above.
As petitioner views the matter, the 2000 lease, which was in
effect during the years in issue,5 was merely a continuation of
the 1985 lease, which obviously predated February 19, 1988.
According to petitioner, the changes in the entities that were
parties to the lease over the years should not defeat the
application of the transitional rule.
4 We have on numerous occasions applied sec. 1.469-2(f)(6),
Income Tax Regs., to recharacterize specific items of income,
leaving remaining items of passive loss with no offset. See,
e.g., Carlos v. Commissioner, 123 T.C. 275 (2004); Krukowski v.
Commissioner, 114 T.C. 366 (2000), affd. 279 F.3d 547 (7th Cir.
2002); Schwalbach v. Commissioner, 111 T.C. 215, 219-224 (1998);
Cal Interiors, Inc. v. Commissioner, T.C. Memo. 2004-99, affd.
sub nom. Beecher v. Commissioner, 481 F.3d 717 (9th Cir. 2007);
Sidell v. Commissioner, T.C. Memo. 1999-301, affd. 225 F.3d 103
(1st Cir. 2000); Connor v. Commissioner, T.C. Memo. 1999-185,
affd. 218 F.3d 733 (7th Cir. 2000).
5 We ignore the portion of 2000 for which the 1992 lease
might have been in effect as it would make no difference to our
analysis and conclusion.
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