-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
(1948).
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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