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could argue that any gain was attributable to the sale of
a capital asset, and that any loss was attributable to the
sale of a noncapital asset. Respondent argues that the
factors identified in cases distinguishing real estate
dealers from investors show that petitioner was an
investor. In applying those factors, respondent focuses on
petitioner's activities after he acquired the memberships
and does not take into account any of the activities of the
joint venture.
The issue we must decide is whether the subject club
memberships were capital assets in petitioner's hands.
Section 1221 defines the term "capital asset" to mean
"property held by the taxpayer", except for the property
that falls into five enumerated categories. The first
category of property excluded from the definition of
capital asset is the following:
(1)stock in trade of the taxpayer or other
property of a kind which would properly be
included in the inventory of the taxpayer if
on hand at the close of the taxable year, or
property held by the taxpayer primarily for
sale to customers in the ordinary course of
his trade or business;
Sec. 1221. The statute requires a two-pronged inquiry:
First, whether the taxpayer held the property "primarily
for sale to customers", and second, whether the taxpayer
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