[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 414 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 414

    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

                            January 5, 1993

  Mr. Stump 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, That 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, leasing, brokerage, appraisal, and finance 
        operations.
            ``(10) Working time.--For purposes of paragraph (8), the 
        term `working time' means any time spent as 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--
                    ``(A) 1 or more shareholders owning stock 
                representing more than 50 percent (by value) of the 
                outstanding stock of such corporation materially 
                participate in the aggregate real property activities 
                of such corporation; or
                    ``(B) such corporation meets the requirements of 
                section 465(c)(7)(C) (without regard to clause (iv)) 
                with respect to the aggregate real property activities 
                of such corporation.''
    (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, 1993.

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