- 16 -
dealer for future use or future realization of the increment in
value is held for investment and not primarily for sale".
Sec. 1.1031(a)-1(b), Income Tax Regs. In Bolker v. Commissioner,
760 F.2d 1039, 1045 (9th Cir. 1985), affg. 81 T.C. 782 (1983),
the court stated that "a taxpayer may satisfy the 'holding'
requirement by owning the property, and the 'for productive use
in trade or business or for investment' requirement by lack of
intent either to liquidate the investment or to use it for
personal pursuits."
For purposes of section 1031, neither the Code nor the
regulations define "held primarily for sale." Whether property
is "held primarily for sale" is a question of fact. In the
context of section 1221, the Supreme Court held that the term
"primarily" means "of first importance" or "principally." Malat
v. Riddell, 383 U.S. 569, 572 (1966).
In analyzing "primarily for sale," petitioner relies on the
factors established in section 1221 cases, which are used to
determine whether property was primarily held for sale to
customers in the ordinary course of business:
(1) The purpose for which the property was initially
acquired;
(2) the purpose for which the property was subsequently
held;
(3) the extent to which improvements, if any were made
to the property by the taxpayer;
(4) the frequency, number, and continuity of sales;
(5) the extent and nature of the transactions involved;
(6) the ordinary business of the taxpayer;
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011