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principle that a person holding lands under such
circumstances may subdivide it for advantageous sale.
[Id. at 520.]
Property sold as undeveloped land with development to be done by
the seller under contract for the purchasers does not
automatically cause the land to be held for sale to customers in
the ordinary course of the taxpayer’s trade or business.
Reithmeyer v. Commissioner, supra at 813. In the setting of this
case, we find that selling the unit 10 property with the offsite
improvements required by Shen did not convert it into a sale in
the ordinary course of a trade or business.
Respondent contends that Ridgemark’s property was zoned for
the highest use (residential), and that fact is dispositive of
Ridgemark’s intent. We believe the zoning classification was
necessary to maximize possible loans by third parties. Although
residential zoning is a necessary element for subdivision, it
does not, per se, convert property to inventory status.
The record does not demonstrate that Ridgemark utilized an
agent or broker. Although the August 12, 1988, minutes mention
brokers’ commissions, it appears that Ridgemark did not want an
agent to negotiate for it, but that it was willing to pay a
commission or a finder’s fee if a successful sale was finalized.
Finally, we find it troublesome that Ridgemark maintained a
sales office and that there was a list of 97 people interested in
purchasing lots in the unit 10 property. That is one factor that
is indicative of an intention to sell the unit 10 property in the
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