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gross income and not been treated as personal holding
company subject to personal holding company tax."
According to petitioner, respondent is seeking to impose
personal holding company tax on petitioner because
"petitioner changed the nature of this income from rental
income to interest income by selling the property to its
rental customers and other customers". Petitioner contends
that this case "is exactly the reason that Congress
provided in I.R.C. � 543(b)(3) that interest income which
is derived from mortgages from the sale of property in the
ordinary course of business be treated as rental income for
the purpose of determining whether rents qualify as
personal holding company income."
Respondent argues that the subject properties were
held primarily for rental and investment and were not held
primarily for sale to customers. Respondent points out
that there is no evidence that the properties were actively
marketed for sale. To the contrary, except in several
instances when petitioner listed a property with a real
estate agent, it held the properties for rental but would
sell a property if it received an acceptable offer.
Respondent notes that petitioner claimed depreciation
deductions with respect to each of the subject properties
and reported the gains from the sale of all of its
properties in a manner that is inconsistent with its
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