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the houses as a “second home” (Ray) or “second residence”
(Houle). In Gettler, we denied the deductions, concluding that
“the primary purpose in both acquiring the house and holding on
to it was to use it as a vacation home.” The cited cases stand
for the proposition that the holding of a primary or secondary
(e.g., vacation) residence motivated in part by an expectation
that the property will appreciate in value is insufficient to
justify the classification of that property as property “held for
investment” under section 212(2) and, by analogy, section 1031.
Moreover, putting aside petitioners’ expectations that both
the Clark Hill and Lake Lanier properties would appreciate in
value, there is no convincing evidence that the properties were
held for the production of income, and there is convincing
evidence that petitioners and their families used the properties
as vacation retreats. Petitioners made neither the Clark Hill
nor Lake Lanier property available for rent. Nor is there any
evidence that petitioners held either property primarily for sale
at a profit. They did not offer the Clark Hill property for sale
until late 1999 when they decided to acquire the more accessible
Lake Lanier property. Thereafter, the Clark Hill property was
held for immediate sale, not for investment. See Newcombe v.
Commissioner, supra at 1302. They did not offer the Lake Lanier
property for sale until required to do so by the need for
liquidity incident to their divorce. While it is true that Mr.
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Last modified: November 10, 2007