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In December 1988, petitioner purchased her ex-husband's
interest in the property for $62,500. The following spring,
construction of the property was completed. At about the same
time, petitioner listed the property for sale with Mel Foster
Co., a real estate agency. After 6 months without success, she
listed the property with another real estate agency, Ruhl & Ruhl
Realtors, Inc. In September 1989, petitioner sold the property
for $166,000. Neither before nor since the sale has petitioner
participated in the business of building houses or selling real
estate.
Petitioner filed U.S. Individual Income Tax Returns, Forms
1040, for the taxable years 1986 and 1989. Her 1989 return
contained two Schedules C, Profit or (Loss) From Business or
Profession. The first, relating to her internal medicine
practice, showed gross income of $380,095 and a net profit of
$105,629. The second, which listed her business as "Construction
Housing", showed a net loss of $179,596. Petitioner claimed an
overall loss of $73,967 from business activities in 1989, i.e.,
the difference between her $105,629 net income from her medical
practice and her $179,596 loss from the "business" involving the
sale of the house. She carried back that $73,967 loss to 19861
1 Since that claimed $73,979 loss was combined with other
items on petitioner's 1989 return to produce a zero amount of
tax, and since, as we hold hereinafter, the carryback was
incorrectly claimed, we need not consider what the correct amount
of the carryback would be if it were otherwise allowable.
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