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Respondent asserts that petitioner was merely an investor in
the Longport property, was not entitled to capitalize any of the
claimed expenditures under the tax law, and in any event has
failed to substantiate most of those expenditures. Further,
respondent asserts that petitioner operated the Longport property
as a summer rental.
We must decide the appropriate amounts for the amount
realized and the adjusted basis in order to arrive at the gain or
loss on the sale of the Longport property. See sec. 1001.
Before we address the items to be included in the adjusted basis
computation, we conclude that the amount realized consists of the
sales proceeds of $216,000 less costs related to the sale
($2,834.31 + $1,500), which petitioner has substantiated.
In order to determine the adjusted basis of the Longport
property, we first address petitioner’s argument that his trade
or business encompasses selling restored properties. Section
263A(b)(2)(A) provides that the capitalization rules of section
263A will apply to real property “described in section 1221(1)
which is acquired by the taxpayer for resale.”3 To meet the
requirements of section 1221(1), the real property must be
“property held by the taxpayer primarily for sale to customers in
3 Petitioner does not contend that the property, in whole
or in part, was produced by him within the meaning of sec.
263A(b)(1); we therefore give no consideration to that provision.
Further, the record does not reflect operating costs with regard
to the improvements made by the taxpayer which could be
capitalized pursuant to sec. 263A(b)(1).
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