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activity involving the Elm Farm, the Court relied primarily upon
the negotiations between the taxpayer and Mr. Pflug and
secondarily on the fact that the taxpayer had no financial
resources (because the taxpayer's net worth was tied up in
nonliquid assets) which would allow him to cover the carrying
charges on the Elm Farm. Id. at 1212.
Unlike the taxpayer in Morley, Mr. Finnegan was not a real
estate broker, and he never listed the Acapulco house with a
broker or agent. There were no negotiations with prospective
purchasers for the sale of the Acapulco house near or after its
completion, and Mr. Finnegan had significant financial
resources.6 Petitioners also still owned the Acapulco house 5
years after construction was completed. Mr. Finnegan did not
meet his burden of proving that the real estate activity was a
trade or business, and the objective facts do not support
petitioners.
Furthermore, when evaluating whether a taxpayer's activities
with respect to real estate amount to a trade or business, we
consider "the nature and purpose of the acquisition of the
property and the duration of the ownership; the continuity of
6 We note that petitioners listed their taxable income as
being $183,056.50 on the original return and $113,539.71 on the
amended return. These totals were derived from their income from
the construction consulting business, rental income, taxable
interest income, tax-exempt interest income, dividend income, a
director's fee, and income from a capital gain distribution.
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