Margaret Hancock - Page 2

          contends, or ordinary losses, as petitioner contends.  To                    
          prevail, petitioner must show that she held the lots for sale to             
          customers in the ordinary course of her trade or business.  See              
          sec. 1221(1).  We hold that petitioner's losses were ordinary                
               Unless otherwise indicated, section references are to the               
          Internal Revenue Code in effect for the years in issue.  Rule                
          references are to the Tax Court Rules of Practice and Procedure.             
                                   FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.                
          A.   Petitioner                                                              
               Petitioner lived in Scottsdale, Arizona, when she filed the             
          petition in this case.  She was 70 and 71 years old during the               
          years at issue.  Her husband, J.W. Hancock (Hancock, or her                  
          husband), was 75 years old when he died on December 31, 1985.                
               Petitioner has two sons, Trevor Hancock and Mark Hancock,               
          who are real estate brokers and developers.  Petitioner's nephew,            
          Greg Hancock, is also a real estate developer.                               
          B.   Petitioner's Involvement in Real Estate                                 
               Petitioner began working with her husband in the real estate            
          business in 1957 or 1958 in California.  Petitioner and her                  
          husband moved to Arizona in the 1960's.  They formed a publicly              
          traded company called J.W. Hancock, Inc.  Petitioner managed its             
          day-to-day operations.  The company subdivided and developed land            

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