Byram v. United States

705 F.2d 1418 (5th Cir. 1983)

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Nature of the Case

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Facts

The trial court, sitting without a jury in P's suit for refund, found the following facts: P sold seven pieces of real property in 1973. P was not a licensed real estate broker, was not associated with a real estate company that advertised itself, and did not maintain a separate real estate office. P advertised none of the seven properties for sale, nor did he list any of them with real estate brokers. All of the transactions were initiated either by the purchaser or by someone acting on the purchaser's behalf. None of the properties sold was platted or subdivided. P's income for 1972 and 1973 included substantial amounts of rental income and interest income. P devoted minimal time to the properties that were sold. From 1971 through 1973, Byram sold 22 parcels of real property for a total gross return of over $9 million and a net profit of approximately $3.4 million. The seven properties at issue, in this case, sold for approximately $6.6 million gross, resulting in a profit of approximately $2.5 million. Six of the seven properties were held by P for periods ranging from six to nine months, intervals just exceeding the then-applicable holding periods for long-term capital gains. The seventh property had been held for two years and six months. P's rental activities for that year resulted in a net tax loss of approximately $186,000. He received rental income from only one of the seven properties sold in 1973. D asserts in its brief that P had entered into contracts to sell at least three of the seven properties in issue before he actually acquired them. P claims that was true in only two instances. P included the profits as capital gains. D assessed a tax deficiency. P paid D and then filed suit for a refund. The district court held that each of the seven properties was for investment purposes and not primarily for sale to customers in the ordinary course of his trade or business. D appealed.