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not hold the 28 lots for that purpose. The lawsuits filed by the
homeowners and Marlboro Township forced HJV to abandon its plans
to sell developed lots to individual home buyers. See, e.g.,
Eline Realty Co. v. Commissioner, 35 T.C. 1 (1960) (holding that,
because a taxpayer's intent is subject to change, the determining
factor relating to a taxpayer's intent is the purpose for which
the property is held at the time of sale). HJV's primary
objective from this point on was to dispose of the 56 undeveloped
lots, and the contract with the Kramers was intended to allow HJV
to achieve its objective. The Kramers, however, breached the
1988 contract, and the subsequent litigation resulted in the
settlement agreement.
The settlement agreement allowed the Kramers to continue to
develop and sell the 28 lots and allowed Whitehouse to complete
the contract entered into by HJV. In addition, Whitehouse would
not have to incur additional legal expenses. Whitehouse held the
lots to facilitate the completion of the sale to, and resolve the
dispute with, the Kramers. The lots were not held by Whitehouse
primarily for sale to customers in the ordinary course of its
business. Accordingly, the proceeds relating to the sale of the
28 developed lots are capital gain.
Respondent contends that the Kramers' activities are imputed
to Whitehouse, and, as a result, Whitehouse held the lots for
sale to customers in the ordinary course of business. We
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