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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,
respectively.
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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