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2. Substantiality of Sales
Courts generally view frequent sales generating substantial
income as tending to show that property was held for sale rather
than for investment. Suburban Realty Co. v. United States, supra
at 181; Biedenharn Realty Co. v. United States, supra. Where
substantial profits result from capital appreciation, however,
and not from the taxpayer’s efforts, infrequent sales generating
large profits tend to show that the property was held for
investment. Williford v. Commissioner, T.C. Memo. 1992-450
(citing Bramblett v. Commissioner, supra).
While the cars in this case appreciated in value, most of
the gains from the sales were due to the dealership’s efforts in
restoring and refurbishing the cars. Further, the dealership
consistently sold the classic cars before the years at issue for
a profit, with the exception of two sales. The dealership
reported all sales at ordinary income rates, as it did for sales
of new and used cars. This factor favors petitioner.
3. Duration of Ownership
Longer holding periods suggest an asset is held for
investment. See Williford v. Commissioner, supra. The Court in
Williford found that holding periods of 19 years and 13 years
served as indicia that the paintings were held for investment.
The classic cars in this case were held 7 to 10 years. Of the
classic cars sold prior to the years at issue, seven were held
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