Paul M. and Wanda E. Harmon - Page 7

                                        - 6 -                                         
          participation requirements of section 469(c)(1).  Sec.                      
          1.469-9(e)(1), Income Tax Regs.  Petitioners argue that Mrs.                
          Harmon is a real estate professional.                                       
               A taxpayer qualifies as a real estate professional and is              
          not engaged in a passive activity if:                                       
                    (i) more than one-half of the personal services                   
               performed in trades or businesses by the taxpayer                      
               during such taxable year are performed in real property                
               trades or businesses in which the taxpayer materially                  
               participates, and                                                      
                    (ii) such taxpayer performs more than 750 hours of                
               services during the taxable year in real property                      
               trades or businesses in which the taxpayer materially                  
          Sec. 469(c)(7)(B).  A trade or business includes being an                   
          employee.  Putoma Corp. v. Commissioner, 66 T.C. 652, 673 (1976),           
          affd. 601 F.2d 734 (5th Cir. 1979); Fowler v. Commissioner, T.C.            
          Memo. 2002-223.  In the case of a joint return, the same spouse             
          must satisfy each requirement.  Sec. 469(c)(7)(B).  In the                  
          present case, that means that petitioner must satisfy both                  
          requirements of section 469(c)(7)(B).  Accordingly, we focus on             
          her participation in the rental activity related to the Lyon                
          Street property.                                                            
               1.  750-Hour requirement                                               
               Petitioners’ position is that Mrs. Harmon spent 774.5 hours            
          on rental activities in 2001, thus exceeding the 750-hour                   
          requirement of section 469(c)(7)(B)(ii).  “The extent of an                 
          individual’s participation in an activity may be established by             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  Next 

Last modified: November 10, 2007