Stephen and Ann Schwalbach v. Commissioner

111 T.C. No. 9

UNITED STATES TAX COURT STEPHEN AND ANN SCHWALBACH, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 17502-97. Filed September 8, 1998. Ps rented a building to a personal service corporation for use in a business activity in which P materially participated. On Ps' 1994 Federal income tax return, Ps offset the rental income with unrelated passive losses. Relying on secs. 1.469-2(f)(6) and 1.469-4(a), Income Tax Regs., R determined that Ps could not offset the rental income with the passive losses because the rental income was recharacterized as nonpassive…