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G. Statements by Petitioner's Representatives
Respondent's revenue agent, Patricia Burson (Burson), met
with petitioner's representatives, Howard Kesselman (Kesselman)
and Carrie Ransil (Ransil), during the audit. At the time,
Kesselman was a consultant for (and not an employee of) Toback,
and Ransil had been employed by Toback for 1 month. At the
audit, Kesselman and Ransil told Burson that Hancock Enterprises
sometimes held back lots from subdivisions for petitioner and her
husband for investment. Ransil had not met petitioner and was
unfamiliar with petitioner's operations at the time of the audit.
OPINION
Petitioner contends that the eight lots she sold in 1993 and
1994 were held for sale to customers in the ordinary course of
her trade or business, and thus that the tax losses from her
sales of those lots that resulted because of the step-up in basis
under section 1014(b)(6) at her husband's death are ordinary
losses under section 1221(1). Respondent contends that
petitioner did not hold the eight lots for sale to customers, and
that the sales were not in the ordinary course of a trade or
business, and thus petitioner's losses are capital losses.
A. Whether Petitioner Held Lots for Sale to Customers in
the Ordinary Course of Her Trade or Business
1. Section 1221(1)
Section 1221(1) excludes from classification as a capital
asset--
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