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purchase, platting, subdividing, rezoning, and improvement of
property”, and since petitioner merely purchased and sold the
parcels of the Prather Ranch Property, he cannot be said to have
sold the property in the ordinary course of his trade or
business. After examining the record, the stipulation provides
the proper characterization of petitioner’s business activity.
Petitioner was involved in real estate sales without development,
as well as real estate sales that involved varying degrees of
development. Indeed, there are several examples of record
wherein petitioner did not engage in development prior to sale
and did not make an immediate sale following purchase, and those
properties were sold as part of his real estate business. We
cannot find that the purchase and the sale of the Prather Ranch
Property were outside petitioner’s ordinary course of business.
However, we must decide whether the Prather Ranch Property was
held primarily for sale in that business.
The U.S. Supreme Court has defined “primarily” as used in
section 1221(1) to mean “principally” or “of first importance”.
Malat v. Riddell, 383 U.S. 569, 572 (1966). “It is, of course,
well established that even though petitioner is a dealer in land,
he still has the right to acquire land and hold it for investment
purposes.” Pritchett v. Commissioner, supra at 163; see also
Maddux Constr. Co. v. Commissioner, 54 T.C. 1278, 1286 (1970).
The taxpayer’s primary holding purpose must be determined by
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