Nature of the Case
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Facts
Ps purchased a farm in January 1942. Ps lived on the farm and have had varying acreages of the farm under cultivation in connection with the nursery and landscape business; the maximum at about 50 acres and the minimum at about 35 acres. In connection with the business they maintained and used a small barn for the storage of equipment, etc., and a lattice shed of approximately 13,000 square feet for the growing of tender plants and shrubs. Ps suffered losses in the business and borrowed money from City National Bank. By October 1958 the mortgaged loans totaled $70,000 and had been questioned and partially charged off by the bank. New owners at the bank put heavy pressure upon Ps to pay off or at least reduce such loan. The bank suggested Ps should sell the farm in order to pay off their loan. The farm would have had a fair market value of $450 per acre. Ps finally decided to improve and subdivide a portion of their farm. They worked out an arrangement with the bank for partial releases from the mortgage on payments of about $2,750 for each lot sold, the average selling price of the lots, which were about six-tenths of an acre each in size, being a little under $ 4,000 each. P sold the lots and used the money to pay off the mortgage. P listed the lots with realtors and advertised in the local newspapers and magazines. P never got a real estate license. P claimed the income as a capital gain. Ps made all the sales of the lots as no real estate commissions were paid. D claimed that the sales were ordinary income and determined that P was in the business of selling lots. P petitioned.
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