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Forget What You Know: Keefe Shows There’s No Hope for Dealer-Investor Jurisprudence  

Author:  Matthew E. Rappaport.

Source: Volume 38, Number 02, Winter 2021 , pp.39-49(11)

Journal of Taxation of Investments

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The so-called “dealer-investor issue” requires courts to differentiate between property held for investment and property held primarily for sale in a taxpayer’s trade or business. The latest case examining the dealer-investor issue is Keefe, a Second Circuit taxpayer appeal of a Tax Court decision. Keefe is an atypical “bad facts” case; the circumstances of the subject property might have favored the taxpayer, but the taxpayers’ failure to file income tax returns until receiving an IRS notice of intent to levy might have doomed their case from the beginning. The result for the tax community is two judicial opinions to further muddy the waters of the dealer-investor issue, proving that litigating the subject is unpredictable and tax opinions are necessary whenever practitioners confront this type of matter.

Keywords: Keefe v. Commissioner, dealer vs. investor, real estate taxation, IRC Sec. 1221(a), capital asset, tax opinions

Affiliations:  1: Falcon Rappaport & Berkman PLLC.

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