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certain of the locations in which the properties were located
were vacation areas. Mr. Hawthorne also owned certain mineral
rights in property located in Ohio.
During the years at issue, Mr. Hawthorne did not sell any of
the properties or advertise any of them for sale. Throughout
those years and thereafter to the time of the trial in this case,
Mr. Hawthorne had not decided what he wanted to do with any of
the properties (e.g., use as a vacation home, give away to family
members, retain, or sell), although he preferred to give the
properties away to family members, rather than pay tax on any
gains that he would realize if he sold or otherwise disposed of
them.
Although Mr. Hawthorne had not decided what he wanted to do
with any of the properties, he performed a variety of services
under the name "Hawthorne Enterprises" with respect to certain of
those properties, for which he was not compensated. Those
services included: (1) With respect to certain property in
Florida, surveying the land and performing routine planning with
local government and with contractors; (2) with respect to
certain property in Colorado, installing a gas line and surveying
the land for a sewer line and a driveway; and (3) with respect to
certain property in New Mexico, installing a septic tank, sewer
lines, electrical wiring, balconies, garage doors, and a shingled
roof and building a fence and a driveway. Mr. Hawthorne also
rented a warehouse in which he stored building materials used by
Hawthorne Enterprises. In order to pay for the activities that
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