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2d 909
56-1 USTC P 9529
The question for decision is whether certain gain was subject to tax as income
derived from the sale of capital assets or as ordinary income. In their income
tax returns for 1949 and 1950, Joe De Lisio and Cristina De Lisio, husband and
wife, returned as capital gain income derived from the sale of certain lots in
Raton, New Mexico. Representatives of the Bureau of Internal Revenue
determined that the gain represented ordinary income. A deficiency in tax for
each year followed. The tax with accrued interest was paid. Claims for refund
were seasonably filed. No action was taken on the claims within six months
after the date of their filing and this suit was instituted to recover the refund.
The court entered judgment for the defendant, and the plaintiffs appealed. For
convenience, reference will be made to Joe Di Lisio as the taxpayer. Cristina Di
Lisio was a formal party for the reason that the spouses filed joint income tax
returns, and no further reference will be made to her.
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Evidence was adduced upon the trial of the cause which tended to establish
these facts. In 1938, or thereabouts, the taxpayer acquired by purchase
approximately 1,150 acres of land outside but adjoining the City of Raton. At
the time of the purchase, it was thought that the land included a certain tract of
40 acres. Upon discovering that the 40 acre tract was not included in the
purchase, the taxpayer acquired it under a tax deed. The 40 acre tract was
platted as the Brilliant Addition. In 1947 or 1948, it was replatted as the
Hillcrest Addition. In about 1947, the taxpayer acquired by purchase a tract
containing 152 acres, likewise outside but adjoining the City of Raton. Prior to
the purchase of that tract, 14 acres of the land was platted as the Mesa Bodena
Addition but the plat was not filed. After the purchase, the taxpayer caused the
plat to be revised and filed. These tracts were not purchased for the purpose of
In reaching the conclusion that the taxpayer held the lots primarily for sale to
customers in ordinary course of his trade or business, we are mindful of the fact
that banking and mercantile were the principal business of the taxpayer; that he
devoted most of his time to such businesses; and that he had other business
interests to which he devoted most of his time. Neither do we overlook the
testimony of the taxpayer that during the taxable years in question, he devoted
only 50 or 60 hours to the selling of the lots. But in 1949, he sold 40 lots and
derived therefrom slightly more than 18 per cent of his total income; and during
the year 1950, he sold 80 1/2 lots and derived therefrom in excess of 15 per
cent of his total income. One may engage in two or more businesses. He may
engage in the banking and mercantile business and have other business
interests, and at the same time hold property primarily for sale to customers in
the ordinary course of the real estate business, within the intent and meaning of
section 117(a), supra. Friend v. Commissioner, supra.
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