28 T.C. 1173">*1174 The respondent has determined a deficiency in income tax in the amount of $ 14,288.58 for the taxable (calendar) year ended December 31, 1952. The deficiency is due to one adjustment -- the determination that the gain of $ 44,100 on the sale of real property by petitioner to a corporation, whose stock was solely owned by the petitioners and their son, was ordinary income rather than long-term capital gain as reported by the petitioners.

Petitioners, by an appropriate assignment of error, have placed the deficiency in issue.

The only question involved is whether the real property, which was sold, was held by the petitioners primarily for sale to customers in the ordinary course of trade or business.

FINDINGS OF FACT.

A stipulation of facts has been filed, is so found, 1957 U.S. Tax Ct. LEXIS 89">*91 and is incorporated herein by this reference.

August Engasser (hereinafter sometimes referred to as petitioner) and Emma Engasser, husband and wife, are individuals residing at Eggertsville, New York, and filed a joint return for the period here involved with the director for the twenty-eighth district of New York.

Prior to 1934, the petitioner was primarily engaged in the business of building and selling homes. During the depression, he held some houses, which he was obligated to reacquire, for rental. From 1934 to 1946, he engaged in the restaurant business.

The petitioner's son, Charles, was discharged from the Army in 1946. Petitioner, who was interested in seeing that his son got started in business, sometime in 1946 entered into an informal partnership agreement with him to engage in the home construction business. On January 2, 1948, a partnership known as August Engasser & Son was organized pursuant to a formal partnership agreement between petitioner and his son. This partnership was engaged in the general building and contracting business and continued the business of the informal partnership. Petitioner and Charles shared the profits of the partnership equally as they1957 U.S. Tax Ct. LEXIS 89">*92 had done under the informal arrangement. 28 T.C. 1173">*1175 On September 1, 1950, the Layton-Cornell Corporation, hereinafter referred to as the corporation, was organized for the purpose of engaging in the general contracting business. It succeeded to the business of the partnership. The entire outstanding stock of the corporation during 1952, the year in issue, was held as follows:

Petitioner was president of the corporation and received a salary. During the periods when the partnerships and corporation were operating he was frequently ill. Charles managed the business of the partnerships and of the corporation. He hired the employees, purchased material, supervised the construction work, and sold the completed homes.

During the time that the partnerships were operating, improved vacant lots would be purchased in the name of the petitioner. The partnerships would erect a house thereon and then sell it. Title to the land would be conveyed from the petitioner to the purchaser. The partnerships built and sold over 50 houses.

When the corporation was formed about 35 1957 U.S. Tax Ct. LEXIS 89">*93 improved lots were conveyed from the petitioner to the corporation. Houses were built by the corporation on other improved vacant lots which were deeded in petitioner's name. After the houses were erected petitioner, at the time of sale, would convey title to the corporation which would then convey to the purchaser.

The land in question (hereinafter referred to as the Amherst property) consisted of approximately 5 1/2 acres of unimproved acreage located between LeBrun Road and Main Street, east of Eggert Road, at the dead end of Layton and Cornell Streets in the town of Amherst, New York. The major portion of the Amherst property was purchased from the Wedekindt estate on December 3, 1949. Two additional lots were purchased from the county of Erie, State of New York, on December 13, 1949. Three remaining lots were purchased from Catherine Mitchell on October 5, 1950. The deeds for all of these lots were recorded in the name of August Engasser.

The Amherst property was owned exclusively by petitioner and was not owned or included among the assets of the partnership of August Engasser & Son. This land was different from other land purchased in petitioner's name in that it was 1957 U.S. Tax Ct. LEXIS 89">*94 not improved vacant land but was unimproved vacant acreage. Petitioner purchased the Amherst property with the hope and intention of building houses thereon. Petitioner and Charles both thought that it would be a good place to build houses.

28 T.C. 1173">*1176 After the acquisition of the Amherst property by petitioner, the town board of Amherst, New York, approved the paving and curbing of two streets running through this property, which action enhanced the value of the land. This was done at the suggestion of the petitioner's attorney.

The Amherst property was sold by petitioner to the corporation on August 29, 1952, for the sum of $ 52,500. The corporation purchased the property for the purpose of constructing new houses on the property and selling them during the course of its business. Petitioner's basis for the Amherst property was $ 8,400. The petitioner reported the $ 44,100 ($ 52,500 minus $ 8,400) gain on the sale as long-term capital gain.

In addition to this Amherst property, petitioner purchased 3 acres of vacant land from Erie County in 1926, which were returned to Erie County in 1944. He repurchased these 3 acres from Erie County in 1945, and also 5 other lots from Erie1957 U.S. Tax Ct. LEXIS 89">*95 County in 1947. Two of these lots were later sold by petitioner. The remainder of this property was, as of July 22, 1954, being held for the purpose of building homes thereon.

The petitioner never made an attempt to sell the Amherst property to anyone. The petitioner did not have a real estate broker's license during the period in question. In the business operations carried on by petitioner and his son it was not necessary for petitioner to have a real estate broker's license as the partnerships, and later the corporation, were selling property which they owned and therefore such a license was unnecessary. The petitioner listed his occupation on his 1952 income tax return as "Contractor."

The petitioner was in the business of buying and selling real estate.

The Amherst property was held by petitioner primarily for sale to customers in the ordinary course of trade or business.

OPINION.

The sole question involved herein is whether the gain of $ 44,100 realized by the petitioner in 1952 on the sale of the Amherst property is ordinary income, as determined by the respondent, or long-term capital gain, as returned by the petitioner. The answer depends on whether the property was1957 U.S. Tax Ct. LEXIS 89">*96 held by the petitioner primarily for sale to customers in the ordinary course of trade or business. Sec. 117, I. R. C. 1939.

The Amherst property was purchased by petitioner in December 1949. ¹ It consisted of about 5 1/2 acres of unimproved land located 28 T.C. 1173">*1177 in a desirable residential area of Amherst, New York. Petitioner made no improvements upon the land. Prior to the sale by petitioner, however, the town of Amherst, after a suggestion by the petitioner's attorney, approved the paving and curbing of two streets running through the land. This action enhanced the value of the land. Petitioner sold the land in August 1952 to the corporation. The corporation's stock was held solely by the petitioner (49 per cent), his wife (2 per cent), and his son Charles (49 per cent). The bona fides of this sale is not questioned and the amount of petitioner's gain from it is not in issue.

Petitioner and Charles had, since 1946, engaged in1957 U.S. Tax Ct. LEXIS 89">*97 the general contracting and home construction business, conducting that business as an informal partnership until January 1948, as a partnership known as August Engasser & Son from January 1948 until September 1950, and as a corporation known as the Layton-Cornell Corporation after September 1950, including the period in question. Petitioner and his son were equal partners in the partnerships, and petitioner was president of the corporation. Petitioner was frequently ill and Charles handled the affairs of the partnerships and the corporation.

Improved vacant lots were purchased in petitioner's name. The partnerships or corporation would construct a house thereon. During the periods when the partnerships were in existence it appears that petitioner would convey title to the lot to the purchaser. During the periods when the corporation was in existence the petitioner, after the house was completed and sold, would convey title to the lot to the corporation, which would in turn convey title to the purchaser. The partnerships constructed over 50 houses. It also appears that at the time the corporation was organized, about 35 lots were conveyed to it by petitioner.

The record does1957 U.S. Tax Ct. LEXIS 89">*98 not show whether the numerous lots purchased in petitioner's name and built on by the partnerships and the corporation were purchased with petitioner's funds and by him and, if so, when they were sold, whether petitioner received any gain thereon, and how it was treated. However, the clear unrebutted inference from the record is that the numerous real estate transactions to which he, the partnerships, and the corporation were a party were more than sufficient to place him individually in the business of buying and selling real estate.

The fact that petitioner did not have a real estate license and that he made no active effort to sell the Amherst property are not significant under the circumstances. Cf. E. Aldine Lakin, 28 T.C. 462, on appeal (C. A. 4). While there are some differences in the facts in the instant case from those which were present in the Lakin case, 28 T.C. 1173">*1178 we do not think those differences in facts are sufficient to make the two cases distinguishable. The record shows that petitioner did not need a real estate license to buy and sell on his own account and that the lots were sold by the corporation or partnerships along 1957 U.S. Tax Ct. LEXIS 89">*99 with the houses built upon them.

In Walter H. Kaltreider, 28 T.C. 121, on appeal (C. A. 3), a corporation, the stock of which was held by petitioner and other members of his family, built houses on an acreage which was owned by, and subdivided by, the taxpayers. The lots and the houses built thereon were sold by the corporation for a lump sum. A part of the purchase price was allocated to the houses and the remainder to the lots. The amount allocated to the houses (less cost of houses sold) was returned as ordinary income and the amount allocated to the lots (less the basis of the lots) was returned as capital gain. We held that "whatever was done here by the corporation was done at the instance and for the benefit of the petitioners as their agent," and that the taxpayers were in the real estate business. The factual pattern here is similar to that in the Kaltreider case, supra, and we think that here, as there, the petitioners were engaged in the real estate business.

Petitioner also argues that the Amherst property was held for investment and not for sale. He seeks to distinguish the Amherst property from the other properties. He contends1957 U.S. Tax Ct. LEXIS 89">*100 (1) that the Amherst property was unimproved vacant acreage while the other properties were improved vacant lots, and (2) that the Amherst property was sold prior to any houses being built thereon while the other properties were never sold until after the houses had been built on them.

We see no merit in either of these distinctions. The record clearly shows that the Amherst property was purchased, as were all of the other properties, with the intent and purpose of constructing houses for sale thereon. That purpose did not change except that in regard to this property the corporation planned to build houses thereon subsequent, rather than prior, to its acquiring the land. Also the record shows that the other acreage which petitioner had purchased prior to the Amherst property was, as late as July 22, 1954, being held for the purpose of constructing houses thereon.

The question here is essentially one of facts that must be determined from the entire record. After considering the facts and circumstances present we have concluded and found as a fact that the property in question was held primarily for sale to customers in the ordinary course of trade or business. The gain on its1957 U.S. Tax Ct. LEXIS 89">*101 sale, therefore, is ordinary income. Accordingly,

Decision will be entered for the respondent.