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business. Petitioner and Mrs. Wood retained ownership of the
Florida house. They resided in the house. They never paid any
rent to any partnership for their use of the house. And they
claimed the Florida house as their residence in their bankruptcy
case. Considering all the facts and circumstances, we find that
the Florida house was not property related to, or used in, any
trade or business.
Finally, we note that generally even though people who buy
property for their own residential purposes are interested in
making a potentially profitable purchase, the purchase or
construction of a personal residence is not considered a
transaction entered into for profit. The primary motive of
acquiring a family residence brings the purchase within the ambit
of section 262, which provides that “no deduction shall be
allowed for personal, living, or family expenses.” The
regulations under section 165 provide: “A loss sustained on the
sale of residential property purchased or constructed by the
taxpayer for use as his personal residence and so used by him up
to the time of the sale is not deductible under section 165(a).”
Sec. 1.165-9(a), Income Tax Regs. The regulations also provide
that in order to be allowed a loss on the sale of property which
at an earlier time was used as a personal residence, a taxpayer
must show that his purpose for owning the residence changed and
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