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Issue 3. 1987 Properties
Respondent determined that the losses petitioners sustained
in 1987 for the McCandless, Killingsworth, Webb, and Bordelon
properties in the amounts of $90,626, $179,765, $72,069 and
$689,703, respectively, were long-term capital losses.
Petitioners assert that these amounts are ordinary losses.5
During 1984, petitioner acquired his interest in each of the
1987 properties. Each of these properties was located in the
area surrounding Austin, Texas. Each of these properties was
foreclosed in 1987.
Petitioners reported the losses sustained on each of the
1987 properties as ordinary on their 1987 Federal income tax
return. Respondent determined that these losses were capital
losses because the 1987 properties were not held by petitioner
for sale to customers in the ordinary course of a trade or
business. Petitioners assert that petitioner was in the trade or
business of acquiring, developing, and selling real estate for
profit, and that each of these properties was held by petitioner
for sale to customers in the ordinary course of this trade or
business. We agree with respondent.
5 In addition, petitioners sustained a loss of $36,274 in
1987 on a parcel of real property known as 3-Corners Ranch.
Petitioners concede that the loss incurred on 3-Corners Ranch is
a capital loss.
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