Margaret Hancock - Page 15

          parties to a transfer are related does not mean the transfer was             
          not in the ordinary course of business if the parties act at                 
          arm's length.  See Beveridge v. Commissioner, 10 T.C. 915, 918               
               Petitioner's sales were substantial during the years at                 
          issue (sales of $190,000 in 1993 and $215,000 in 1994), with an              
          economic profit of $136,000 in 1993 and $171,000 in 1994.  See               
          Lewellen v. Commissioner, T.C. Memo. 1981-581 (sale of 31 lots               
          over a 12-year period coupled with sales of $151,400 during the              
          years at issue suggests that the lots were held primarily for                
          sale to customers in the ordinary course of business).                       
               Respondent contends that the fact that petitioner had large             
          tax losses from the sale of the lots from 1987 to 1994 shows that            
          she was not in the trade or business of real estate because she              
          would have abandoned the business to avoid having those tax                  
          losses.  Respondent also contends that petitioner could have sold            
          the lots if she had lowered their prices.  We disagree.                      
          Petitioner derived economic profit of $1,304,937 from selling 47             
          of the 48 lots from 1987 to 1996; she did not sell them primarily            
          to generate tax losses.  If petitioner had abandoned her efforts             
          to sell the lots or sold them for less, she either would have                
          been left with unsold lots or had smaller economic profit and                
          larger tax losses.                                                           

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