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passive activities unless the requirements of section 469(c)(7)
* * * are met”. Other adjustments made in the notice of
deficiency are not in dispute.
Discussion
In general and as relevant here, an individual is not
entitled to a deduction for a passive activity loss incurred
during the taxable year. Sec. 469(a). A passive activity loss
is defined as the excess of the aggregate losses from all passive
activities for the taxable year over the aggregate income from
all passive activities for that year. Sec. 469(d)(1). A passive
activity is any activity which involves the conduct of any trade
or business and in which the taxpayer does not materially
participate. Sec. 469(c)(1). For this purpose, a “trade or
business” is generally defined as any activity in connection with
a trade or business or any activity for the production of income
under section 212. Sec. 469(c)(6).
In general, a rental activity is treated as a passive
activity regardless of whether the taxpayer materially
participates. Sec. 469(c)(2),(4). If a taxpayer is described in
section 469(c)(7), section 469(c)(2) does not apply, and the
taxpayer’s rental activity, if conducted as a trade or business
or for the production of income, is a passive activity unless
the taxpayer materially participates in the activity. Sec.
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Last modified: March 27, 2008