26 T.C. 1159">*1159 The respondent has determined deficiencies in petitioners' income tax as follows:

The 1956 U.S. Tax Ct. LEXIS 84">*85 cases were consolidated for trial and opinion.

Petitioners Joseph M. Philbin, John J. Cullom, and Richard X. Zimmermann were engaged in the practice of law as equal partners during the years 1951 and 1952. The questions presented herein are with respect to their distributive shares of the partnership income from the sale of certain vacant lots in the city of Chicago during the years 1951 and 1952. The wives of petitioners Philbin and Cullom are made petitioners herein solely by reason of having filed joint returns with their husbands. Hereafter the term "petitioners" shall mean Joseph M. Philbin, John J. Cullom, and Richard X. Zimmermann.

The issues in these consolidated proceedings are (1) whether gains realized by the petitioners in 1951 and 1952 from the sale of real property should be taxed as long-term capital gain or as ordinary income, and (2) whether the distributive shares of income derived 26 T.C. 1159">*1160 by the petitioners from the sale of the above real property is subject to self-employment tax under sections 480 and 481, Internal Revenue Code of 1939.

FINDINGS OF FACT.

Some of the facts have been stipulated and they are found accordingly.

Joseph M. Philbin and Jane M. Philbin are husband 1956 U.S. Tax Ct. LEXIS 84">*86 and wife who reside in Evergreen Park, Illinois. For the calendar years 1951 and 1952, they filed timely joint income tax returns with the then collector of internal revenue for the first district of Illinois.

John J. Cullom and Jewell A. Cullom are husband and wife who reside in Chicago, Illinois. For the calendar years 1951 and 1952 they filed timely joint income tax returns with the then collector of internal revenue for the first district of Illinois.

Richard X. Zimmermann is an individual who resides in Chicago, Illinois. For the calendar years 1951 and 1952 he filed timely income tax returns with the then collector of internal revenue for the first district of Illinois.

Joseph M. Philbin, John J. Cullom, and Richard X. Zimmermann are attorneys at law, having been admitted to the practice of law in the State of Illinois in 1938, 1939, and 1947, respectively. In 1947, Philbin opened a law and real estate office at 7340 S. Western Avenue, Chicago, Illinois, the neighborhood in which he grew up and had previous connections. In 1950, Zimmermann, who had occupied office space with Philbin since 1948, joined Philbin and the partnership of Philbin and Zimmermann was formed. In 1951, 1956 U.S. Tax Ct. LEXIS 84">*87 Cullom joined the partnership, which then became known as Philbin, Zimmermann, and Cullom. This partnership continued to the date of the hearing. During the years 1951 and 1952, the law firm was engaged in the general practice of law from its office at 7340 S. Western Avenue, Chicago, Illinois.

Philbin obtained a real estate broker's license in 1947 and he has held such a license continuously to the date of the hearing. He was actively engaged in the real estate business from 1947 through part of 1950, and received some brokerage commissions since 1950. From 1947 to the date of the hearing "Joseph M. Philbin" was listed in the classified section of the Chicago telephone directory under the headings, "Real Estate" and "Lawyer." On the exterior of this 1-story building at 7340 S. Western Avenue, the following signs and advertisements appear: On the front window are painted the words "Real Estate"; hung in the front window is a neon sign reading, "Joseph M. Philbin, Real Estate-Insurance"; in somewhat smaller letters painted on the front window are the words, "Attorney at Law, Joseph M. Philbin-Richard X. Zimmermann"; on each of the two 26 T.C. 1159">*1161 sides of the building, there is painted a sign 1956 U.S. Tax Ct. LEXIS 84">*88 which covers the entire side of the building which reads, "Joseph M. Philbin, Real Estate, Sales, Mortgages, Insurance, Special Real Estate Financing." These signs and advertisements existed on the exterior of the building during the years 1951 and 1952.

During the calendar year 1947, Philbin individually purchased and sold 3 unimproved lots in the city of Chicago. During the calendar year 1948, Philbin and Cullom jointly purchased and sold 1 unimproved lot in the city of Chicago. During the calendar year 1949, Philbin and Cullom jointly purchased and sold 3 unimproved lots in the city of Chicago. For all 3 of the years enumerated above, the gains realized from the sales of the lots were reported as short-term capital gains.

In 1949, Philbin, Zimmermann, and Cullom began to make joint purchases of vacant lots located in the southwest section of the city of Chicago. Each agreed to share the costs of acquisition, clearing title, and other expenses, and also to share the profits or losses upon the sale of the lots. The following schedule sets forth the number of lots acquired and sold by the petitioners jointly during the years 1949 to 1952, inclusive:

Generally, 1956 U.S. Tax Ct. LEXIS 84">*89 the petitioners purchased lots which were encumbered by liens, or delinquent taxes, or special assessments. After acquiring the encumbered property, the petitioners would expend time, money, and legal skill putting into motion the legal machinery of Cook County and the State of Illinois by which clear title could be obtained by compromising the amounts owed on the property. After the machinery had been put into motion, a period of from 4 months to a year was required to obtain a clear title in this manner. This procedure is in the nature of a foreclosure proceeding instituted by the landowner by which the petitioners were required to correspond with the commissioners of Cook County, file appearances, attend foreclosure sales, prepare orders of sale, certificates of sale, decrees of foreclosure, confirmation of sales, and any other necessary pleadings. The petitioners performed all of the above services in connection with clearing the liens on their property for themselves, sharing the costs and services.

While some of the lots bought and sold in 1951 and 1952 were scattered over the southwestern section of Chicago, the majority were in the Hinkamp subdivision, which was in close 1956 U.S. Tax Ct. LEXIS 84">*90 proximity to petitioners' office. This subdivision had been platted some time previous to the 26 T.C. 1159">*1162 acquisition of the lots by petitioners and for the most part, abutted streets and sidewalks. The petitioners, after acquiring the lots, did not list them with real estate brokers, did not hire agents for sales purposes, did not erect "For Sale" signs on the property, did not advertise the lots in newspapers, and did not make physical improvements on the property.

Many factors such as the Korean War and expansion to outlying areas of Chicago produced a great demand for housing in the area in 1951 and 1952, creating a corresponding demand for vacant lots. This brought about a "seller's market" in the area, therefore the petitioners were constantly besieged with requests from contractors and builders with offers to buy.

Generally, the lots were sold to construction companies or general contractors, but a small number were sold to individual buyers. Some of the same construction companies and contractors who purchased lots from the petitioners in 1949 and 1950 also purchased lots from them in 1951 and 1952. Of the lots which were sold in 1951 and 1952, an average of less than a year elapsed 1956 U.S. Tax Ct. LEXIS 84">*91 between the date of acquisition and the date of sale.

A net gain of $ 52,705.77 was realized from the sales of real estate by the petitioners for the year 1951. A net gain of $ 40,517.15 was realized from the sales of real estate by the petitioners for the year 1952. The following schedule sets forth a comparison of the net distributive shares of each petitioner from the sale of real estate, and the reported net distributive shares of each from the practice of law for the years 1951 and 1952:

On the joint income tax returns for the taxable years 1951 and 1952, Joseph M. Philbin and Jane M. Philbin, and John J. 1956 U.S. Tax Ct. LEXIS 84">*92 Cullom and Jewell A. Cullom, reported their respective shares of the gains realized from the lot sales as long-term capital gain. On his individual 26 T.C. 1159">*1163 income tax return for the taxable years 1951 and 1952, Richard X. Zimmermann reported his share of the gains realized from the sales of lots by the petitioners as long-term capital gain. Respondent determined that the distributive shares of the profits realized in 1951 and 1952 from the sale of lots were taxable as ordinary income.

The lots sold by the petitioners in 1951 and 1952 were held by them primarily for sale to customers in the ordinary course of their trade or business. Therefore, the distributive shares of profit from the sale of these lots cannot be afforded capital gains treatment, but should be taxed as ordinary income to each of the petitioners.

The income derived from the sale of these lots by petitioners is self-employment income, and is subject to self-employment tax under sections 480 and 481 of the Internal Revenue Code of 1939.

OPINION.

The first issue in these consolidated cases is whether the profit realized by the petitioners from the sale of vacant lots in the city of Chicago in 1951 and 1952 is taxable as long-term 1956 U.S. Tax Ct. LEXIS 84">*93 capital gain or as ordinary income. Petitioners contend that the vacant lots were bought with "surplus funds" as long-term investments; that they were capital assets which were held for more than 6 months and therefore the profit realized from their sale should be given long-term capital gains treatment under section 117 (a) (1), Internal Revenue Code of 1939. Respondent determined that the vacant lots were held by the taxpayers primarily for sale to customers in the ordinary course of their trade or business as defined in the exclusion from capital assets in section 117 (a) (1).

The issue is essentially one of fact. D. L. Phillips, 24 T.C. 435. We are of the opinion that the petitioners have failed in their burden of proving that the lots in question were held primarily for investment and not for sale to customers in the ordinary course of their trade or business. Numerous cases involving this issue have been decided. These cases have adopted many criteria or tests which are of aid in determining the issue. No single test, however, is decisive and the question must be viewed in the light of all pertinent factors and particularly the facts of the individual case. Boomhower v. United States, 74 F. Supp. 997">74 F. Supp. 997. 1956 U.S. Tax Ct. LEXIS 84">*94 We said in W. T. Thrift, Sr., 15 T.C. 366, at page 369:

The governing considerations have been the purpose or reason for the taxpayer's acquisition of the property and in disposing of it, the continuity of sales or sales related activity over a period of time; the number, frequency, and substantiality of sales, and the extent to which the owner or his agents engaged in sales activities by developing or improving the property, soliciting customers, and advertising.

26 T.C. 1159">*1164 Petitioner Joseph M. Philbin, who was the only witness at the trial, testified that he was a lawyer, admitted to practice in the State of Illinois in 1938. In 1947 he opened a real estate and law office at 7340 S. Western Avenue, Chicago, Illinois. He was joined in a law partnership sometime during 1950 by petitioner Richard X. Zimmermann, and in 1951 by petitioner John J. Cullom, both of whom are also licensed to practice law in Illinois.

Philbin testified that he was "actively" in the real estate business from 1947 through part of 1950, but that since that date had not been in such business, though he admitted that he had received some realty brokerage commissions since that date. Philbin's name was listed in the Chicago 1956 U.S. Tax Ct. LEXIS 84">*95 telephone directory under the heading "Real Estate" from 1947 to the date of the hearing. He acquired a real estate broker's license in 1947 and has kept the license current. The office from which the petitioners worked and carried on their law partnership at all times, and which is in close proximity to many of the lots sold in 1951 and 1952, was virtually covered with signs of all descriptions advertising to the world that therein the petitioners also carried on a real estate business.

Prior to the formation of the law partnership, the petitioners began to jointly purchase and sell real estate. In 1949, they purchased 50 vacant lots and sold 13; in 1950, they purchased 39 lots and sold 37; in 1951, they purchased 50 lots and sold 47; and in 1952, they purchased 53 lots and sold 47. All of the lots purchased and sold, before and after the law partnership was formed, were jointly purchased, expenses were shared, and profits divided equally. ³

The petitioners contend that their purchases of vacant lots were made from surplus funds, and 1956 U.S. Tax Ct. LEXIS 84">*96 were intended to be long-term investments; that they were forced to sell or "be left holding the bag" investmentwise. We note, however, that at the same time the petitioners were "liquidating" their investment in 47 lots during 1951, they were purchasing 50 others, some of which were in the same subdivision; and while selling 47 lots in 1952, they were purchasing 53 more. While the petitioners' stated intention at the time of acquisition should be considered, the ultimate question of decisive consequence is the purpose for which the lots were being held at the time of the sales. Friend v. Commissioner, 198 F.2d 285; Mauldin v. Commissioner, 195 F.2d 714 (C. A. 10, 1952), affirming 16 T.C. 698. We also note that the lots sold in 1951 and 1952 were retained by the petitioners on an average of less than a year. We think that these facts are inconsistent with the contentions of the petitioners that they were liquidating an investment so as not to be left "holding the bag" investmentwise.

26 T.C. 1159">*1165 Petitioners argue that they did not advertise, place "For Sale" signs on the property, hire agents, solicit customers, list the property with realtors, or make improvements thereon. They also 1956 U.S. Tax Ct. LEXIS 84">*97 argue that their sales were infrequent, sporadic, and lacking in continuity.

We have held many times that it is not necessary to advertise or solicit customers where an active seller's market exists. Arthur E. Wood, 25 T.C. 468; Mauldin v. Commissioner, supra. Advertising is especially unnecessary when, as here, a few construction companies and building contractors do most of the buying. It did not require advertising for repeat customers to know that the petitioners were in the business of buying and selling vacant lots. It appears also that Philbin grew up in the neighborhood of his office and had contacts there prior to the time that he opened his office. Even conceding that advertising is a necessary element to this issue, we feel that the petitioner's own testimony indicates sufficient advertising. The fact that the 1-story building in which petitioners worked was completely covered with advertising; the fact that partner Philbin's name was listed under "Real Estate" in the telephone directory; and the close proximity of their office to the majority of the lots sold constitute sufficient advertising in a buyer's market such as existed in Chicago in 1951 and 1952.

While petitioners 1956 U.S. Tax Ct. LEXIS 84">*98 made no physical improvements on the property bought and sold, they did expend time, energy, and professional skills in removing liens against the property to render their commodity more easily marketable at a higher price. The procedure used by the petitioners required from 4 months to a year to complete. Removal of such liens to improve marketability of title have been held to be "fully as important as improvement of the land itself through subdivision, grading, or street installation; and they involve similar use of skill, capital, and business activity." J. Roland Brady, 25 T.C. 682.

We think that the record shows conclusively that purchases and sales by petitioners were not infrequent and sporadic but were continuous and substantial from 1949 through the tax years 1951 and 1952. Whether property is purchased for sale or for investment depends upon the number and proximity of purchases and sales to one another. Harriss v. Commissioner, 143 F.2d 279, affirming 44 B. T. A. 999. At the same time the petitioners were selling lots, they were busy acquiring others, indicating a going business. In the tax years involved, 1951 and 1952, the net profit from the sale of lots to the 1956 U.S. Tax Ct. LEXIS 84">*99 petitioners was $ 93,222.95. During the same period, their net profit, or the total of their reported net distributive shares from the practice of law, was $ 20,893.78. We think that the sales, and profits therefrom, were substantial by any comparison.

That the petitioners were lawyers does not preclude their engaging in another business. Friend v. Commissioner, supra. In the Boomhower26 T.C. 1159">*1166 case, supra, upon which the petitioners rely heavily, an attorney was upheld in claiming long-term capital gain upon the sale of lots. There are several distinguishing features between the cited case and the instant case. The taxpayer, an attorney, in the Boomhower case, individually purchased a tract of 20 acres from a trust in 1936, after he, as trustee, had made a bad investment in the tract for the trust. The court stated of the taxpayer: "It is apparent that the tract was acquired by him out of a sense of responsibility to the trust, * * * to relieve the trust of an undesirable asset." In addition to the manner in which the taxpayer acquired the property involved, there are other distinguishing features. The taxpayer was unable to sell the property for a number of years and then sold only 1956 U.S. Tax Ct. LEXIS 84">*100 8 lots in the 2-year period involved. Prior to this time he had never been in the real estate business; he did not hold himself out to the public as being a dealer in real estate; he made no further purchases of real estate after selling began; and his profits from the sale of these lots constituted an insignificant part of his income for the years in question. These features completely distinguish the instant case from the Boomhower case, supra. The other cases cited by the petitioners have many of the same distinguishing features. In Dunlap v. Oldham Lumber Co., 178 F.2d 781 (C. A. 5, 1950), the taxpayer, a $ 300,000-a-year corporation, acquired 50 vacant lots in 1928, sold 16 lots between 1928 and 1944, 27 lots in 1944, and 7 in 1945. No purchases for the purpose of sale were made after 1928. In Fahs v. Crawford, 161 F.2d 315, the taxpayer, an attorney, made a single purchase in 1925 of a complete subdivision, held the property for 15 years, qualified it for Federal Housing Administration loans so that it would sell, and then accepted the purchase price and executed deeds therefor as it was purchased or sold by a real estate broker under an exclusive commission contract.

We 1956 U.S. Tax Ct. LEXIS 84">*101 conclude from a careful analysis of all the evidence that the petitioners held the lots which were sold in 1951 and 1952 primarily for sale to customers in the ordinary course of a business. The petitioners were dealers in vacant lots and gains derived from the sale thereof are taxable as ordinary income.

The second issue is whether the income realized upon the sale of the lots is self-employment income and therefore subject to the tax provided in sections 480 and 481, Internal Revenue Code of 1939. The sections were added to chapter 1 of the Internal Revenue Code relating to income taxes. We have jurisdiction over all taxes levied under chapter 1. Sec. 272, 1939 Code. The tax imposed is "an additional tax on the income derived by the self employed [taxpayer] as an employee." Cain v. United States, 211 F.2d 375, certiorari denied 347 U.S. 1013">347 U.S. 1013. Petitioners argue the income here is within 26 T.C. 1159">*1167 the exclusion of section 481 (a) (4) in that the income is "gain * * * from the sale * * * of a capital asset, * * *." This argument is foreclosed by our holding above that the income is ordinary income. Petitioners next argue that lawyers are exempt from this tax under section 481 (c) (5), 1956 U.S. Tax Ct. LEXIS 84">*102 1939 Code. The section does exclude from the payment of this tax all net earnings gained from the performance of service by an individual "in the exercise of his profession as a * * * lawyer, * * *." Here, we have determined that the sale of lots by petitioners was not in the exercise of their profession as lawyers, but was a separate and individual business. They are therefore required to pay this tax, not as attorneys, but as real estate dealers.

Decisions will be entered for the respondent.