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of an individual, section 165(c) limits the deduction to (1)
losses incurred in a trade or business, (2) losses incurred in
any transaction entered into for profit, even though not
connected with a trade or business, and (3) losses of property
not connected with a trade or business or with a transaction
entered into for profit, if such losses arise from fire, storm,
shipwreck, or other casualty, subject to limitations set forth in
section 165(h).
Petitioner asserts that the Florida house was held primarily
for sale to customers in the ordinary course of either (1) his
and Mrs. Wood’s trade or business as a real estate dealers or (2)
their family partnership’s business of constructing the house for
immediate sale. We have found that petitioner and Mrs. Wood were
not real estate dealers. Further, we do not think that the
arrangement petitioner had with his brother and Mrs. Wood’s
mother constituted a partnership that carried on a business.
There is no evidence in the record that a partnership was
created. Neither petitioner’s brother nor Mrs. Wood’s mother
testified at the trial in these cases. The records from the
bankruptcy proceeding lead us to believe that the funds advanced
by petitioner’s brother and Mrs. Wood’s mother were debts of
petitioner and of Mrs. Wood.
Furthermore, the activities of constructing, owning, and
selling the Florida house were not carried on as a trade or
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