[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1465 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1465

    To amend the Internal Revenue Code of 1986 with respect to the 
 treatment of certain real estate activities under the limitations on 
                    losses from passive activities.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 24, 1993

  Mr. Orton introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 with respect to the 
 treatment of certain real estate activities under the limitations on 
                    losses from passive activities.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
    (a)(1) Subsection (c) of section 469 of the Internal Revenue Code 
of 1986 (relating to passive activity losses and credits limited) is 
amended by adding at the end the following new paragraphs:
            ``(7) Taxpayers engaged in the real property business.--In 
        the case of a taxpayer engaged in the real property business, 
        the determination of what constitutes an activity and whether 
        an activity is a passive activity shall be made by treating the 
        taxpayer's rental real property operations, undertakings and 
        activities in the same manner as nonrental trade or business 
        operations, undertakings, and activities.
            ``(8) Individuals engaged in the real property business.--
        For purposes of paragraph (7), an individual is engaged in the 
        real property business if--
                    ``(A) such individual spends at least 50 percent of 
                such individual's working time in real property 
                operations; and
                    ``(B) such individual spends more than 500 hours 
                during the taxable year in real property operations.
            ``(9) Real property operations.--For purposes of paragraph 
        (8), the term `real property operations' means any real 
        property development, redevelopment, construction, 
        reconstruction, acquisition, conversion, rental, operation, 
        management, and leasing.
            ``(10) Working time.--For purposes of paragraph (8), the 
        term `working time' means any time spent providing services or 
        otherwise working in connection with the activity, whether in 
        the capacity of an employee, sole proprietor, S corporation 
        shareholder, partner in a partnership, or beneficiary of a 
        trust or estate.
            ``(11) Closely held c corporations engaged in the real 
        property business.--For purposes of paragraph (7), a closely 
        held C corporation is engaged in the real property business if 
        1 or more shareholders owning stock representing more than 50 
        percent (by value) of the outstanding stock of such corporation 
        participate for more than 500 hours in the aggregate real 
        property activities of such corporation.''
    (2) Subsection (h) of section 469 of such Code is amended by adding 
at the end the following new paragraph:
            ``(6) Individuals engaged in the real property business.--
        In the case of an individual engaged in the real property 
        business (within the meaning of paragraph (8) of subsection 
        (c)), such individual shall be treated as materially 
        participating in an activity which includes real property 
        operations (within the meaning of paragraph (9) of subsection 
        (c)) only if the individual participates for more than 500 
        hours in such real property operations. For purposes of this 
        paragraph, the number of hours which an individual participates 
        in real property operations shall be determined without 
        application of paragraph (5) of this subsection (h).''
    (b)(1) Paragraph (2) of section 469(c) of such Code is amended to 
read as follows:
            ``(2) Passive activity includes certain rental 
        activities.--Except for rental activities treated in the same 
        manner as nonrental trade or business activities pursuant to 
        paragraph (7), each rental activity is a passive activity 
        without regard to whether or not the taxpayer materially 
        participates in the rental activity.''
    (2) Paragraph (4) of such section 469(c) is amended to read as 
follows:
            ``(4) Material participation not required for paragraph 
        (3).--Paragraph (3) shall be applied without regard to whether 
        or not the taxpayer materially participates in the activity.''
    (c) The amendments made by this section shall apply to taxable 
years beginning after December 31, 1992.

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