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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year at
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
FINDINGS OF FACT1
Petitioners resided in Colorado Springs, Colorado, at the
time their petition was filed. During 1994, real estate agent
Jim Perry contacted Timothy J. Phelan (petitioner) and informed
him that a 1,050-acre parcel in Regency Park was soon to be
listed for sale. Having grown up in the vicinity of the Regency
Park property, petitioner and his brother, Thomas Phelan, were
familiar with the property. During 1994, petitioner, his
brother, and Robert Oldach (Oldach), with the sole purpose of
investing in the 1,050-acre parcel, organized Jackson Creek Land
Co. (JCLC) as a limited liability corporation in the State of
Colorado. At all relevant times, petitioner owned a 40-percent
interest in JCLC, petitioner’s brother also owned a 40-percent
interest, and Oldach owned the remaining 20-percent interest.
The members of JCLC did not own real estate licenses.
The Regency Park property consisted of 1,776 acres of
unimproved real estate that was acquired during the early 1980s
by the Regency Group, a residential real estate developer.
1The parties’ stipulation of facts is incorporated by this
reference.
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