Richard A. Pettit - Page 7

                                        - 7 -                                         
          entitled to deduct the full amount of his loss under section                
          165(a).                                                                     
               Respondent's position is that petitioner's loss is limited             
          by section 165(f) because the East Lyme property was held by                
          petitioner as a capital asset.  Respondent argues that the East             
          Lyme property does not fall within the section 1221(1) exception            
          for property held primarily for sale to customers in the ordinary           
          course of a trade or business because petitioner was not in the             
          business of buying and selling real estate.                                 
               The question of whether property is held primarily for sale            
          to customers in the ordinary course of the taxpayer's trade or              
          business is a question of fact that depends on the circumstances            
          of each case.  McManus v. Commissioner, supra at 211.  After                
          fully considering the record in this case, we find that                     
          petitioner did not hold the East Lyme property as a capital                 
          asset.                                                                      
               The East Lyme property construction project and its                    
          subsequent disposition arose within the context of petitioner's             
          existing construction business.4  See S & H , Inc. v.                       
          Commissioner, 78 T.C. 234, 243 (1982).  Respondent attempts to              
          isolate petitioner's activity with respect to the East Lyme                 

          4         The fact that petitioner simultaneously worked as an              
          airline pilot does not preclude a finding that he was engaged in            
          the construction business, since a taxpayer may be engaged in               
          more than one business.  S & H , Inc. v. Commissioner, 78 T.C.              
          234, 243 (1982); Curphey v. Commissioner, 73 T.C. 766, 775                  
          (1980).                                                                     




Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011