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B. Whether Petitioners May Deduct Interest on Their Schedules C
1. Whether Petitioner Was in the Trade or Business of
Buying and Selling Real Estate
To be engaged in a trade or business, the taxpayer must be
involved in the activity with continuity and regularity and the
taxpayer's primary purpose for engaging in the activity must be
for profit. Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).
Whether a taxpayer's activities are a trade or business is a
question of fact that must be decided based on the circumstances
of each case. Higgins v. Commissioner, 312 U.S. 212, 217 (1941).
Courts have considered several factors in deciding whether a
taxpayer was in the trade or business of buying and selling real
estate, including: (a) The nature and purpose of buying the
property; (b) the length of time the taxpayer owned the property;
(c) the continuity of sales activity over a period of time; (d)
the number and frequency of sales; (e) the extent to which the
taxpayer developed the property, solicited customers, and
advertised; and (f) the ratio of sales to other sources of
income. United States v. Winthrop, 417 F.2d 905, 910 (5th Cir.
1969); Polakis v. Commissioner, 91 T.C. 660, 669-670 (1988);
Hoover v. Commissioner, 32 T.C. 618, 625 (1959); Dressen v.
Commissioner, 17 T.C. 1443, 1447 (1952); Thrift v. Commissioner,
15 T.C. 366, 369 (1950).
Petitioners contend that they bought their property for
resale, but the objective facts show otherwise. Petitioner had
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