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Presumably the purpose of this recharacterization rule was to prevent business owners from being able to create a passive income generator to offset passive losses, by renting property to a controlled entity when arguably the lessor and the lessee are somewhat indifferent to the cost of the lease. When a taxpayer has excessive passive losses or deductions, the burned-out shelter may offer solace as a passive income generator. For one thing, bank venture arms can not invest in finance companies, real estate and insurance businesses or any passive income generator. |
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