- 36 -
listed "subdivider and developer" instead of "real estate
operator and lessor of building" as its principal business
activity.
Additionally, the evidence shows that petitioner continued
its subdividing and developing activities. For example,
petitioner continued to build houses on the 20-lot tract in
Yucaipa after petitioner allegedly discontinued developing,
recording the income from the sale of the houses as ordinary
income in 1990, 1991, 1992, and 1993. In regard to these other
developments by petitioner, we know that it continued to hold
these properties for sale, rather than investment. The record
does not substantiate petitioner's assertion that it built homes
on existing lots and no longer subdivided raw land into lots.
Mr. Baker's mere statements that petitioner intended to
discontinue the development business are not enough to change the
characterization of the Exchange Property. See Tollis v.
Commissioner, T.C. Memo. 1993-63, affd. per curiam without
published opinion 46 F.3d 1132 (6th Cir. 1995). Petitioner
presented no objective and contemporaneous evidence to establish
its change in intent. Considering petitioner's actions, Mr.
Baker's health concerns do not persuade us to accept petitioner's
conclusion that it stopped its subdividing and developing
activities.
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