The Tax Court yesterday, in Moore v. Commissioner, T.C. Memo. 2007-134 (5/30/07), held that a married couple's exchange of vacation homes did not qualify for like-kind exchange treatment because the homes were not held for investment purposes as required by § 1031(a):
As a preliminary matter, we accept as a fact that petitioners hoped that both the Clark Hill and Lake Lanier properties would appreciate. However, the mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence. See Jasionowski v. Commissioner, 66 T.C. 312, 323 (1976). ... Moreover, a taxpayer cannot escape the residential status of property merely by moving out. [See] Newcombe v. Commissioner, 54 T.C. 1298, 1302 (1970). ...
This Court has frequently applied the reasoning of one or both of Jasionowski and Newcombe in rejecting taxpayer arguments that because a second or vacation home was held for appreciation (i.e., investment) the taxpayer was entitled to a deduction, under § 212(2), for expenses incurred to maintain or improve the property. ... [T]he 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 § 212(2) and, by analogy, § 1031. ...
[T]he evidence overwhelmingly demonstrates that petitioners' primary purpose in acquiring and holding both the Clark Hill and Lake Lanier properties was to enjoy the use of those properties as vacation homes; i.e., as secondary, personal residences.
The Tax Court also rejected the taxpayer's motion to reject the Government's post-trial brief in the case. Although the brief was filed one day outside of the 60-day period prescribed by Rule 151(b), the Tax Court rejected the motion because the Court had erred in setting the due date of the brief. For the court's discussion of this issue, see below the fold.
May 31, 2007 in New Cases | Permalink
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