Bud Raymond - Page 9

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               In the instant case, petitioner purchased land with the                
          intention of subdividing it into residential lots and                       
          constructing single family residences thereon.  By doing so,                
          petitioner substantially improved the property.  Furthermore,               
          petitioner listed the property with Rancho, and through Rancho,             
          petitioner advertised the property in newspapers and on posted              
          signs.5  Over a 2-year period, petitioner sold the 58 homes built           
          in the subdivision.  After adjusting for concessions by the                 
          parties, petitioner had gross receipts of $2,750,130 (not                   
          including the $423,770 in notes subject to the present dispute),            
          cost of goods sold of $2,680,990, and expenses of $133,119 from             
          his construction business.  Based on the record before us, we               
          conclude that petitioner held the homes in Pajaro Dunes primarily           
          for sale to customers in the ordinary course of his business;               
          therefore, the sales were on account of dealer dispositions and             
          do not qualify as installment sales.  Accordingly, petitioner               
          must include the face value of the notes in his 1995 income.6               
               In reaching our holdings herein, we have considered all                
          arguments made by the parties, and to the extent not mentioned              

               5  We note that in California an “agent may be authorized to           
          carry forward any ordinary business transaction, the agent's act            
          becoming the act of his principal.”  Whittaker v. Otto, 10 Cal.             
          Rptr. 689, 692 (Ct. App. 1961); see also Channel Lumber Co., Inc.           
          v. Simon, 93 Cal. Rptr. 2d 482, 486 (Ct. App. 2000).                        
               6  As a result, we need not evaluate whether petitioner                
          correctly applied the installment method.                                   

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