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Petitioner held real property and stocks and received income
from rent, interest, and the sale of stocks and realty. Although
some of the income was from rent, the leases were net leases, and
petitioner was not involved in operating or managing the rental
properties. Petitioner’s situation here is not, in any
distinguishable aspect, different from that in H.C. Cockrell
Warehouse Corp. v. Commissioner, 71 T.C. 1036 (1979), where the
taxpayer’s income was derived from the rental of real property to
operating companies.
Petitioner argues that its circumstances are more similar to
those of the taxpayer in Dahlem Found., Inc. v. Commissioner, 54
T.C. 1566 (1970). In that case, the Court explained that the
word “mere” was designed to draw a distinction between holding or
investment corporations that are strictly passive and those that
engage in some measure of business activity. See id. at 1576.
In H.C. Cockrell Warehouse Corp. v. Commissioner, supra at 1046,
we described the activities that were sufficient to avoid “mere
holding company” status in Dahlem Found., Inc. v. Commissioner,
supra, as follows:
(1) Locating an undeveloped parcel of real estate for a
shopping center; (2) negotiating and paying the
purchase price of such undeveloped land; (3) securing
leases for occupancy of the buildings to be situated in
the shopping center; (4) arranging for a loan for
construction of the shopping center; (5) various
management functions with respect to the center; and
(6) maintaining and repairing various portions of the
center. The taxpayer also actively managed other
properties.
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