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maintains that the gain in question does not qualify for
nonrecognition treatment under section 512(a)(3)(D) because the
4.8-acre tract on which the 11 homesites are situated was never
"used directly" in the performance of petitioner's exempt
function.
Petitioner asserts that the gain realized on the sale of the
11 homesites qualifies for nonrecognition treatment under section
512(a)(3)(D) on the theory that its various acts, including the
engagement of a layout designer to develop a plan to construct
recreational facilities over the entire 63.8-acre tract,
demonstrate that the property was used directly in the
performance of its exempt function. In this regard, petitioner
contends:
Petitioner used the 63.8 acres during the five-year
restriction period in the only way it realistically
could, which was to rent it out as farmland and to
begin the process of developing the New Facilities on
the 63.8 acres by engaging a layout designer to develop
plans. Petitioner used the 63.8 acres during the five-
year restriction period in performance of Petitioner's
exempt function by beginning the development of better
recreational facilities. It is difficult to comprehend
how the development would not be in performance of
Petitioner's exempt function.
In support of the foregoing, petitioner asserts that neither the
plain language of section 512(a)(3)(D) nor the legislative
history of the provision requires that property "be in actual (as
distinct from planned) recreational use" in order to qualify for
nonrecognition treatment.
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