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What Allen v. U.S. Means for Real Estate Tax Planning  

Author:  Matthew E. Rappaport.

Source: Volume 32, Number 03, Spring 2015 , pp.35-45(11)

Journal of Taxation of Investments

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The U.S. District Court for the Northern District of California held for the government in Allen v. U.S., holding that Allen was a dealer when he made a one-time sale of undeveloped property and that gain on the sale was therefore ordinary income, not capital gain. The decision surprised real estate tax practitioners because Allen seemed to have fairly strong factors supporting his position. However, a closer examination reveals that the decision may mark a substantial shift in dealer-investor jurisprudence, particularly regarding adverse taxpayer admissions. The author discusses why the Allen decision was, in fact, reasonable, consistent, and probably correct given the facts, and sets out the implications the case has for real estate tax planning going forward.

Keywords: real estate tax, dealer versus investor, ordinary gain, capital gain, trade or business property, investment property, Allen v. U.S.

Affiliations:  1: Karol & Sosnik, P.C..

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