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Petitioner's business generally consists of buying and
developing raw land. After purchasing a parcel of land,
petitioner applies for and obtains zoning variances, grading
plans, street plans, water plans, sewer plans, storm drain plans,
site plans, architectural plans, environmental feasibility
studies, and development and construction cost estimates. He
then subdivides the land by having the city or county where the
land is located approve tentative tract maps, parcel maps, "ready
for recording" (but unrecorded) tract maps, and recorded tract
maps. Once he has subdivided a parcel of land, he sells it to
homebuilders who build homes on it.
In 1991, petitioner bought an undeveloped 8-acre parcel in
San Bernardino County, California, for $357,423. One year later,
he bought a 10-acre San Bernardino parcel for $1,002,000. (We
shall refer to these properties hereafter as the San Bernardino
parcels.) Petitioner bought the San Bernardino parcels intending
to develop them. He has never undertaken any of the development
activities described above in connection with the San Bernardino
parcels because he believes economic conditions in San Bernardino
County are adverse. He continues to hold the parcels for
development.
Petitioner paid $72,181 in real estate taxes on the San
Bernardino parcels in 1993. He included these amounts in the
real estate taxes he deducted on his 1993 Schedule C.
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Last modified: May 25, 2011