Margaret Hancock - Page 12

               stock in trade of the taxpayer or other property of a                   
               kind which would properly be included in the inventory                  
               of the taxpayer if on hand at the close of the taxable                  
               year, or property held by the taxpayer primarily for                    
               sale to customers in the ordinary course of his trade                   
               or business * * *                                                       
          Section 1221(1) differentiates between the "'profits and losses              
          arising from the everyday operation of a business' * * * and 'the            
          realization of appreciation in value accrued over a substantial              
          period of time'".  Malat v. Riddell, 383 U.S. 569, 572 (1966)                
          (quoting Corn Prods. Refining Co. v. Commissioner, 350 U.S. 46               
          (1955), and Commissioner v. Gillette Motor Transp., Inc., 364                
          U.S. 130 (1960)).  "[P]rimarily" means "principally" or "of first            
          importance."  Id.                                                            
               Whether property is held by a taxpayer "'primarily for sale             
          to customers in the ordinary course of * * * business'" is a                 
          question of fact.  S & H, Inc. v. Commissioner, 78 T.C. 234, 242             
          (1982) (quoting sections 1221(1) and 1231(b)(1)(B)).  Courts                 
          consider numerous factors in deciding this issue, and no one                 
          factor controls.  See Biedenharn Realty Co. v. United States, 526            
          F.2d 409, 415 (5th Cir. 1976).  Petitioner bears the burden of               
          proving that her property was held for the purpose she contends.             
          See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).               
               The following factors indicate whether property is held                 
          primarily for sale to customers in the ordinary course of a trade            
          or business:  (a) The frequency and substantiality of sales, (b)             
          the nature of the taxpayer's business, (c) the purpose for which             

Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011