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To be engaged in a trade or business the taxpayer must have
a good faith expectation of profit although that expectation need
not be reasonable. Burger v. Commissioner, 809 F.2d 355, 358
(7th Cir. 1987), affg. T.C. Memo. 1985-523; Golanty v.
Commissioner, 72 T.C. 411, 425-426 (1979), affd. without
published opinion 647 F.2d 170 (9th Cir. 1981). However, as
stated by the Supreme Court in Commissioner v. Groetzinger, 480
U.S. 23, 35 (1987):
not every income-producing and profit-making endeavor
constitutes a trade or business. * * * to be engaged in
a trade or business, the taxpayer must be involved in
the activity with continuity and regularity and * * *
the taxpayer’s primary purpose for engaging in the
activity must be for income or profit. * * *
Although an individual who is engaged in the business of selling
real estate to customers may be characterized as a real estate
dealer, an individual who holds real estate for investment or
speculation, and receives rentals therefrom, is not a real estate
dealer. Sec. 1.1402(a)-4(a), Income Tax Regs.
Petitioner asserts that he and Mrs. Wood were real estate
dealers and that the properties constituted inventory held for
sale to customers. Whether property is held by a taxpayer for
sale to customers in the ordinary course of the taxpayer’s
business or for another purpose is a question of fact, and each
property must be considered individually. Gartrell v. United
States, 619 F.2d 1150, 1153 (6th Cir. 1980); Cottle v.
Commissioner, 89 T.C. 467, 486-487 (1987).
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