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debentures) was excluded from FPHCI by the same country
exception.
3. The Caselaw
Respondent relies principally upon four cases in support of
his argument that the H&C assets were not used in Dover UK’s
business before their deemed sale by Dover UK: Reese v.
Commissioner, 615 F.2d 226 (5th Cir. 1980), affg. T.C. Memo.
1976-275; Azar Nut Co. v. Commissioner, 94 T.C. 455 (1990), affd.
931 F.2d 314 (5th Cir. 1991); Acro Manufacturing Co. v.
Commissioner, 39 T.C. 377 (1962), affd. 334 F.2d 40 (6th Cir.
1964); and Ouderkirk v. Commissioner, T.C. Memo. 1977-120. In
three of those cases (Reese, Azar Nut, and Ouderkirk) the issue
is whether an individual’s gain or loss on the sale of a parcel
of real property is capital or ordinary.
a. Reese v. Commissioner
In Reese, the taxpayer financed the construction of a
manufacturing plant, which he intended to sell to investors who
would agree to lease the building to a corporation for use in the
corporation’s manufacturing business. The taxpayer was the chief
officer and principal shareholder of the corporation. The
partially completed plant was sold at a loss to satisfy a
judgment against the taxpayer. The issue was whether the loss
was capital or ordinary. The taxpayer argued for ordinary loss
treatment on the ground that the plant was either (1) held
primarily for sale to customers in the ordinary course of his
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