James D. Schlicher - Page 14

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          part of the residence, noting that the taxpayer had used some of            
          this area to conduct helicopter experiments, which detracted from           
          its characterization as a residence.  More importantly, the                 
          taxpayer in Beckwith only regarded the house itself and 5                   
          appurtenant acres as his residence.  However, in the instant                
          case, the petitioner regards and uses all of the Clayton property           
          as his residence, except for the portion allocated to his                   
          business.  At trial, the petitioner repeatedly and unequivocally            
          testified that he moved to the Clayton premises, because he                 
          appreciates nature, admires unobstructed views of the                       
          countryside, enjoys living in open spaces where he can hike and             
          ride horseback, and ultimately desires to live the rest of his              
          life there.  We find petitioner's testimony to be credible.                 
               On brief, the respondent relies on Grace v. Commissioner,              
          T.C. Memo. 1961-252, for the proposition that occasional or                 
          insignificant use of property, such as for storage of business              
          tools, is not sufficient to determine its character as business             
          property.  In Grace, we found a taxpayer's business use of his              
          residence to be "insignificant," where he merely stored                     
          construction tools in part of his basement.  Accordingly, we held           
          that an allocation between the business and residential use was             
          not required for purposes of section 1034(a) nonrecognition.                
          Respondent, treating the instant case as the converse of Grace,             
          contends that the petitioner here used the upper, steeply hilled            
          section of the Clayton property only "insignificantly," and thus            

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