H.R. 3732 — 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.

 
HR 3732 SC
101st CONGRESS
2d Session
 H. R. 3732
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
November 19, 1989
Mr. ANDREWS (for himself, Mr. THOMAS of California, Mr. MATSUI, Mr. SHAW,
Mr. ARCHER, Mr. SCHULZE, and Mr. PASHAYAN) introduced the following bill;
which was referred to the Committee on Ways and Means
July 13, 1990
Additional sponsors:  Mr. BUECHNER,  Mr. CHANDLER,  Mr. HAYES of Louisiana,
Mr. CHAPMAN,  Mr. BAKER,  Mr. SUNDQUIST,  Mr. BARNARD,  Mr. ROBERTS,
Mr. MILLER of Washington,  Mr. BUSTAMANTE,  Mr. PICKETT,  Mr. JENKINS,
Mr. GALLO,  Mr. KANJORSKI,  Mr. DYSON,  Mr. BLAZ,  Mr. CAMPBELL of
Colorado,  Mr. COLEMAN of Texas,  Mr. FRANK,  Mr. RAVENEL,  Mr. DAVIS,
Mr. MCEWEN,  Mr. LAGOMARSINO,  Mr. VANDER JAGT,  Mr. STUMP,  Mr. BROWN of
Colorado,  Mr. SHUMWAY,  Mr. DARDEN,  Mr. GOSS,  Mr. FIELDS,  Mr. COURTER,
Mr. JONTZ,  Mr. HANCOCK,  Mr. SCHAEFER,  Mr. SENSENBRENNER,  Mr. RHODES,
Mr. LANCASTER,  Mr. DELAY,  Mr. SCHUETTE,  Mr. EMERSON,  Mr. PORTER,
Mr. HEFNER,  Mr. MARLENEE,  Mrs. MORELLA, Mr. LIVINGSTON,  Mr. LEWIS of
Florida,  Mr. WOLPE,  Mr. BILBRAY,  Mr. PURSELL,  Mr. IRELAND,  Mr. GUNDERSON,
Mr. DERRICK,  Mr. ARMEY,  Mr. HATCHER,  Mr. ASPIN,  Mr. BATEMAN,  Mr. ANTHONY,
Mr. WELDON,  Mr. FLIPPO,  Mr. CARR,  Mr. FEIGHAN,  Mr. JACOBS,  Mr. CLINGER,
Mr. KASTENMEIER,  Mr. DREIER of California,  Mr. SMITH of Texas,  Mr. UPTON,
Mr. HANSEN,  Mr. VALENTINE,  Mr. HALL of Texas,  Mr. QUILLEN,  Mr. COSTELLO,
Mr. CLEMENT,  Mr. BARTLETT,  Mr. JOHNSON of South Dakota,  Mr. ANNUNZIO,
Mr. RAY,  Mr. KYL,  Mr. MCMILLEN of Maryland, Mr. GEREN of Texas,  Mr. NEAL
of North Carolina,  Mr. ROE,  Mr. HASTERT,  Mr. STAGGERS,  Mr. CRANE,
Mr. RAHALL,  Mr. BALLENGER,  Mr. MRAZEK,  Mr. PAXON,  Mr. FLAKE,  Mr. AUCOIN,
Mr. YOUNG of Alaska,  Mr. PARKER,  Mr. DEWINE,  Mr. KASICH,  Mr. BOEHLERT,
Mr. HUTTO,  Mr. INHOFE,  Mr. TAUZIN,  Mr. ROWLAND of Connecticut,
Mr. PICKLE,  Mr. HALL of Ohio,  Mrs. LLOYD,  Mr. LIPINSKI,  Mr. PACKARD,
Mr. NAGLE,  Mrs. VUCANOVICH,  Mr. DANNEMEYER,  Ms. SCHNEIDER,  Mr. GILMAN,
Mr. PAYNE of Virginia,  Mr. KLECZKA,  Mr. ROTH,  Mr. COX,  Mrs. BENTLEY,
Mr. BRYANT,  Mr. FISH,  Mr. GRANT,  Mr. MOORHEAD,  Mr. MADIGAN,  Mr. COMBEST,
Mr. LEATH of Texas,  Mr. SPENCE,  Mr. FROST,  Mr. WEBER,  Mr. DORGAN of North
Dakota,  Mr. HERGER,  Mr. CLARKE,  Mr. PALLONE,  Mr. MURTHA,  Mr. BILIRAKIS,
Mr. SWIFT,  Mr. KOLTER,  Mr. SMITH of Vermont,  Mr. KOSTMAYER,  Mr. MONTGOMERY,
Mr. DOWNEY,  Mr. BURTON of Indiana,  Mr. GEKAS,  Mr. MCCRERY,  Mr. SHAYS,
Mr. DENNY SMITH,  Mr. GALLEGLY,  Mr. ESPY,  Mr. LAUGHLIN,  Mr. FAWELL,
Mr. MACHTLEY,  Mr. VOLKMER,  Mrs. LOWEY of New York,  Mr. MOAKLEY,
Mr. DOUGLAS,  Ms. LONG,  Mr. VISCLOSKY,  Mr. WILSON,  Mr. ERDREICH,
Mr. STEARNS,  Mr. HYDE,  Mr. MILLER of Ohio,  Mr. ROBERT F. SMITH,  Mr. SMITH
of New Hampshire,  Mr. GLICKMAN,  Mr. CRAIG,  Mrs. BOXER,  Mr. ORTIZ,
Mr. SARPALIUS,  Mrs. SCHROEDER,  Mr. RICHARDSON,  Mr. BARTON of Texas,
Mrs. UNSOELD,  Mr. JOHNSTON of Florida,  Mr. MCMILLAN of North Carolina,
Mr. MCDERMOTT,  Mr. AKAKA,  Mr. SANGMEISTER,  Mr. TRAFICANT,  Mr. BLILEY,
Mr. SMITH of Florida,  Mr. BROOMFIELD,  Mr. FASCELL,  Mr. LANTOS,
Mrs. PATTERSON,  Mrs. COLLINS,  Mr. TALLON,  Mr. DWYER of New Jersey,
Ms. PELOSI,  Mr. UDALL,  Mr. TAUKE,  Mr. COBLE,  Mr. ROSE,  Mr. POSHARD,
Mr. MCDADE,  Mr. RINALDO,  Mr. MANTON,  Mr. YATRON,  Mr. WILLIAMS,
Mr. THOMAS A. LUKEN,  Mr. SCHIFF,  Mr. COLEMAN of Missouri,  Mr. WYLIE,
Mr. BROWN of California,  Mr. JONES of Georgia,  Mr. BROOKS,  Mr. MCNULTY,
Mr. HERTEL,  Mr. MAVROULES,  Mr. TANNER,  Mr. BONIOR,  Mr. MARKEY,  Mr. HARRIS,
Mr. ALEXANDER,  Mr. SISISKY,  Mr. NIELSON of Utah,  Mr. FOGLIETTA,  Mr. THOMAS
of Georgia,  Mr. EVANS,  Mr. SKAGGS,  Mr. ROBINSON,  Mr. SAXTON,  Mr. BATES,
Mr. MYERS of Indiana,  Mr. LEHMAN of Florida,  Mr. WOLF,  Mr. APPLEGATE,
Mr. TORRICELLI,  Mr. ROHRABACHER,  Mr. OXLEY,  Mr. JONES of North Carolina,
Mr. GINGRICH,  Mr. GILLMOR,  Mr. WATKINS,  Mr. MORRISON of Washington,
Mr. WISE,  Mr. BEREUTER,  Mr. CALLAHAN,  Mr. STALLINGS,  Mrs. BYRON,
Ms. SNOWE,  Mr. HILER,  Mr. PANETTA,  Mr. HUCKABY,  Mr. JAMES,  Mr. LEWIS
of California,  Mr. ROWLAND of Georgia,  Mr. MORRISON of Connecticut,
Mr. BORSKI,  Mr. THOMAS of Wyoming,  Mr. LIGHTFOOT,  Ms. KAPTUR,  Mr. ECKART,
Mr. BRUCE,  Mrs. JOHNSON of Connecticut,  Mr. WHITTAKER,  Mr. SMITH of New
Jersey,  Mr. PRICE,  Mr. TAYLOR,  Mr. BUNNING,  Mr. DEFAZIO,  Mr. DICKINSON,
Mr. HOLLOWAY,  Mr. BRENNAN,  Mr. STENHOLM,  Mr. DUNCAN,  Mr. HAMMERSCHMIDT,
Mr. OLIN,  Mr. SKEEN,  Mr. SHUSTER,  Mr. NEAL of Massachusetts,  Mr. MURPHY,
Mr. DURBIN,  Mr. DYMALLY,  Mr. HUBBARD,  Mr. SOLOMON,  Mr. HOPKINS,  Mr. LENT,
Mr. RIDGE,  Mr. LOWERY of California,  Mr. NOWAK,  Mr. SAWYER,  Mr. NELSON
Florida,  Mr. FAZIO,  Mr. WYDEN,  Mr. CAMPBELL of California,  Mr. FORD
of Tennessee,  Mr. PARRIS,  Mrs. SAIKI,  Mr. HOCHBRUECKNER,  Mr. CONTE,
Mr. RITTER,  Mr. CARPER,  Mr. COOPER,  Mr. YATES,  Mr. MARTIN of New York,
Mr. NATCHER,  Mr. SLAUGHTER of Virginia,  Mr. DORNAN of California,
Mr. HUNTER,  Mr. ENGEL,  Mr. MOLLOHAN,  Mr. MARTINEZ,  Mr. YOUNG of
Florida,  Mr. GRANDY,  Mrs. MARTIN of Illinois,  Mr. PAYNE of New Jersey,
and  Mr. MCCURDY
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 Act 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, 1989.
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.

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