Personal property rentals - 1.469-4

Technical topics regarding tax preparation.
#1
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Under 1.469-4(d)(1)(C), the word "proportionate" is used (pasted below for reference). In this context, does "proportionate" mean in relation to each other, or to their ownership in each activity?

For example, if partners A & B each own 50% of partnership X, and A & B each own 25% of trade or partnership Y which rents personal property, are these "proportionate" ownership interests in both X and Y for purposes of this definition?


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1.469-4(d) Limitation on grouping certain activities. The grouping of activities under this section is subject to the following limitations:

(1) Grouping rental activities with other trade or business activities—(i) Rule. A rental activity may not be grouped with a trade or business activity unless the activities being grouped together constitute an appropriate economic unit under paragraph (c) of this section and—

(A) The rental activity is insubstantial in relation to the trade or business activity;

(B) The trade or business activity is insubstantial in relation to the rental activity; or

(C) Each owner of the trade or business activity has the same proportionate ownership interest in the rental activity, in which case the portion of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity.
 

#2
KoiCPA  
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I think it means the same percentage of both entities. If A&B own 50% each of X, then they'd have to own 50% each of Y.

Otherwise in your scenario, we run into owner C who has the other half of Y. But C doesn't own any part of X, therefore even if you called A and B proportionate, C is clearly not proportionate and the "each owner" requirement is not met for all three.
 

#3
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I’m not worried about “c” in this example because C isn’t an owner in the non-rental trade or business. I’m trying to understand if the goal is to keep A and B in equal standing between the non-rental and rental activities…. The reg uses the word “proportionate” rather than “equal”…
 


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