Tax Research Problem:

Roy Ritter died two years ago. Among the assets he owned were Ritter Ranch, a cattle ranch consisting of 12220 acres in Texas, in accordance with Roy's will, the ranch along with stocks producing substantial dividends passed to a testamentary trust( the Ritter Trust) with grandson Gene Ritter as trustee. The sole assets of the trust is the ranch, and unfortunately the ranch is operating at a loss. Gene is an accountant and devotes some hour to day to day ranching issues but does not meet the material participation test in the context of the passive activity loss (PAL) rules. Gene, in his role as trustee, employs a well trained, full time ranch manager and 20 " ranch hands". Ritter Trust is a new client of your firm. Discuss whether " material participation" is measured by just the trustee's hours and activities or whether the hours and efforts of the trustee, the ranch manager, and all of the other employees should be considered in terms of memo. Recall that sec 469 is the primary IRC section for the PAL rules.