Question: Passive activity loss rules limit a taxpayer's ability to deduct losses generated by passive activities on their tax returns. However, a taxpayer who can show that he "materially participated" in an activity for the tax year generally can deduct the loss from the activity. Find a court case in which a taxpayer is deemed not to have been a material participant, and therefore their share of the losses is considered passive. Explain why the taxpayer failed the material participant test and why the court ruled against them.
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