Horace D'Angelo - Page 13

                                        -13-                                          
          of the debt settlement agreement and hold for petitioner.4  H.K.            
          Peach, PNC’s successor, may deduct the entire amount of the                 
          eliminated debt, and petitioner, as a 50-percent shareholder of             
          H.K. Peach, may deduct $196,398, or one-half of the entire                  
          amount.                                                                     
          III.  Engaged in a Trade or Business                                        
               Petitioner argues that his extensive involvement in real               
          estate business ventures places him in a trade or business of               
          developing industrial real estate during the subject years.                 
          Respondent maintains that petitioner’s involvement with the real            
          estate has always been on behalf of Arbor.  Respondent concludes            
          that petitioner was not personally engaged in a trade or                    
          business.  We agree with petitioner.                                        
               Petitioner began his real estate career more than 20 years             
          ago.  In 1995 and 1996, he was actively involved in developing              
          the industrial real estate and nursing home businesses, in                  
          accordance with the terms of the 1983 Development Agreement.                
          Over the years, petitioner and Pomeroy, alone and sometimes with            
          others, built a number of industrial rental and nursing home                
          rental partnership enterprises.  Petitioner personally ran a                
          substantial part of the operations, supervising Arbor’s                     
          management activities and the partnerships’ rental activities.              


               4 On the basis of our holding, we need not and do not                  
          discuss petitioner’s alternative argument.                                  





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