In this TAM, Trust A and Trust B owned interests in Company X. B was a Trustee of both Trust A and Trust B. A was a shareholder in Company X and a special trustee of Trust A and Trust B. Company X owned Company Y as a subsidiary and A was also the president of Company Y. Regarding Company X and Company Y stock owned by the Trusts, A, as the special trustee, controlled all decisions regarding the sale or retention of such stock and all voting of such stock. A indicated that he was unable to differentiate his time spent as president of Company Y, as special trustee of Trust A and Trust B, and as a shareholder of Company X. B, as Trustee of Trust A and Trust B, was not involved in the operations of the activities of either Company X or Company Y.

The TAM indicates that based on the above facts, the Trusts did not materially participate in the activities of Company X or Company Y for purposes of § 469(h). Under § 469(h)(1), material participation is defined as an activity which the taxpayer participates in on a regular, continuous and substantial basis. There are no Treasury regulations indicating how this applies to estates and trusts but the legislative history for § 469 indicates that "an estate or trust is treated as materially participating in an activity . . . if an executor or fiduciary, in his capacity as such, is so participating." Accordingly, A's time spent as special trustee voting the stock of Company X and Company Y or considering the sales of such stock would count for purposes of determining the Trusts' material participation, but such time did not rise to the level of being "regular, continuous and substantial." Therefore, the TAM concludes that Trust A and Trust B did not materially participate in the activities of Company X or Company Y.