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House until the same was brought to their attention by the
Norrises. The Norrises proposed that they would purchase
petitioners' Thousand Palms Property only if petitioners would
purchase the Palm Springs House.
We are guided in this regard by O'Neill v. Commissioner,
supra, where, in an analogous situation, the property had been
brought to the taxpayer's attention by her daughter. There, the
taxpayer's daughter had been unable to obtain financing and
requested that the taxpayer purchase the property for the
daughter's rental use. We held that the taxpayer had not
purchased the residential real property in a businesslike manner
and hence that the taxpayer did not possess the requisite profit
motive. Similarly, we do not think that petitioners purchased
the Palm Springs House in a businesslike manner.
We next find that the time and effort petitioners spent in
carrying on the activity is not indicative of a profit motive.
Petitioners point out that they took the time to investigate the
value of the Palm Springs House by looking at comparables.
However, any prudent purchaser of residential property would
investigate the value of comparable property. Accordingly, such
action, in and of itself, is not indicative of a profit motive.
Petitioners have not indicated that they spent any other
time or effort to ensure the profitability of their alleged
investment. In fact, petitioners immediately listed the Palm
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