- 29 -
Because of the downturn in the Detroit residential real
estate market in 1987, petitioner husband did not sell as many
houses. He sold five houses for $116,595 in 1987, three for
$27,847 in 1988, and two for $42,400 in 1989. To cut costs, he
rented properties that he did not sell immediately. The rents
paid his carrying costs, such as mortgage payments, utilities,
and property taxes. Cf. Baris v. Commissioner, T.C. Memo. 1965-
182 (gain on sale of rental property held for sale to customers
taxed as ordinary income; rental income deemed incidental).
Under these circumstances, we do not believe the infrequency of
petitioner husband's sales shows that he held the property for
investment rather than for sale. Suburban Realty Co. v. United
States, supra at 174; Biedenharn Realty Co. v. United States,
supra at 411-412; United States v. Winthrop, supra at 907. We
hold that petitioner husband held the houses for sale to
customers.
5. Petitioners' Gains and Losses From Other Investments
Petitioners underreported their capital loss by $12,080 for
a net loss of $63,165 in 1987 and overreported capital gain by
$12,377 for a net gain of $474 in 1988, excluding capital gain
from the sale of their interests in the Bagnasco-Tabbi Funeral
Home and Americana.
Petitioners concede that they had capital gain of $2,500 in
1987 on their receipt of 24 months of medical insurance coverage
for their interest in Bagnasco-Tabbi Funeral Home. Petitioners
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011