John H. and Mary E. Douglas - Page 12

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          sale of the property for which petitioners received the second              
          deed as long-term capital gain and not as ordinary income.                  
          Petitioners also maintained outside employment and reported wages           
          for 1992 and 1993 in the amounts of $91,343.65 and $34,821.17,              
               While petitioner participated in the purchase, renovation,             
          management, rental, and sale of his property, he has not shown              
          that he was engaged in the trade or business of selling real                
          estate or in any other real estate business during the years in             
          issue.  From this record, it appears that petitioner engaged in             
          the activities for investment purposes.  Since petitioner's                 
          activities do not rise to the level of a trade or business within           
          the intent and meaning of section 162(a), petitioners' legal                
          expenses from years 1992 and 1993 are not deductible as business            
          expenses attributable to an active trade or business.                       
               Petitioners further contend that respondent previously                 
          treated petitioner's activities as an active trade or business              
          for purposes of examinations conducted in 1989, 1990, and 1991.             
          The parties have stipulated that                                            
               The petitioners' income tax returns had been audited                   
               for 1989, 1990 and 1991; the activities of * * *                       
               [petitioner] were treated by the auditors at that time                 
               as an active trade or business for purposes of the                     
               audit, which did not involve issues related to taking a                
               bad-debt deduction.                                                    
               Each tax year stands on its own and must be separately                 
          considered.  United States v. Skelly Oil Co., 394 U.S. 678, 684             

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