Stephen S. Ziegler - Page 8

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               Having summarized the concerns of Congress in enacting                 
          section 469 into the Code, we shall now summarize certain provi-            
          sions of that section that are pertinent here.  Pursuant to                 
          section 469(a), a taxpayer is not allowed to offset a passive               
          activity loss for the taxable year against other income for such            
          year.  For purposes of section 469, a passive activity loss for             
          the taxable year is the amount, if any, by which the aggregate              
          losses from all passive activities for the taxable year exceed              
          the aggregate income from all passive activities for such year.             
          Sec. 469(d)(1); sec. 1.469-2T(b)(1), Temporary Income Tax Regs.,            
          53 Fed. Reg. 5711 (Feb. 25, 1988).  The term “passive activity”             
          is defined in pertinent part as any activity in which the tax-              
          payer does not materially participate.  Sec. 469(c)(1).  Any                
          rental activity is a passive activity, regardless whether the               
          taxpayer materially participates in the activity.  See sec.                 
               Under section 469(b), a passive activity loss is treated as            
          a deduction allocable to the passive activity giving rise to such           
          loss for the succeeding taxable year.  Under that section, a                
          passive activity loss may be carried forward indefinitely.  In              
          addition, section 469(g)(1) provides in pertinent part:                     
               SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED.                 
                  *       *       *       *       *       *       *                   
                    (g) Dispositions of Entire Interest in Passive                    
               Activity.--If during the taxable year a taxpayer dis-                  

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