David Taylor Enterprises, Inc. & Subsidiaries - Page 12

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          and bought some paintings for resale and others for investment.             
          The taxpayer kept separate his private art collection and the               
          paintings for resale.  The taxpayer classified the paintings in             
          his private collection as capital assets and reported capital               
          gains on the sale of these paintings.  The Commissioner objected            
          to the capital treatment, arguing that the taxpayer was an art              
          dealer and derived the sales proceeds in the ordinary course of             
          business.  The Tax Court agreed with the taxpayer and held that             
          the paintings were capital assets held for investment.                      
               The Court used eight factors to analyze whether the art                
          collection was held primarily for sale to customers in the                  
          ordinary course of the taxpayer’s trade or business.  The eight             
          factors are:  (1) Frequency and regularity of sales; (2) the                
          substantiality of sales; (3) the duration the property was held;            
          (4) the nature of the taxpayer’s business and the extent to which           
          the taxpayer segregated the collection from his or her business             
          inventory; (5) the purpose for acquiring and holding the property           
          before sale; (6) the extent of the taxpayer’s sales efforts by              
          advertising or otherwise; (7) the time and effort the taxpayer              
          dedicated to the sales; and (8) how the sales proceeds were                 
          used.14  Williford v. Commissioner, supra; see also Bramblett v.            

               14Petitioner and respondent both deem the last factor                  
          inconclusive and not relevant, and we therefore do not address              
          it.  Generally, this factor indicates that assets are held for              
          sale where the taxpayer uses sales proceeds to replenish                    

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