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held for investment. Rather, the issue in both cases, decided in
the taxpayers’ favor, was whether incidental recreational or
residential use by the taxpayers or family members of property
primarily used by the taxpayers for commercial farming or fishing
(or whether the personal enjoyment they derived from those
primary usage activities) negated the taxpayers’ profit motive
for engaging in those activities.
B. Conclusion
Neither the Clark Hill nor Lake Lanier property constituted
property held for investment for purposes of section 1031(a).
Therefore, petitioners’ disposition of the former and acquisition
of the latter did not qualify as a tax-free “like-kind” exchange
of properties under section 1031.
II. The Membership Interest Acquisition Issue
A. Introduction
Our resolution of this issue will determine whether
petitioners are required to report, as Ms. Moore’s distributable
share, 2 percent of the LLC’s income for the years in issue, as
alleged by petitioners, or 12 percent of that income, as alleged
by respondent.
B. Petitioners’ Position
Petitioners acknowledge that Dr. Joffe transferred a 10-
percent membership interest in the LLC to Ms. Moore, which,
together with his transfer of another 10-percent interest to Dr.
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Last modified: November 10, 2007