*793 The petitioner is not entitled to a deduction for a loss under section 23(e) of the Revenue Act of 1932. Property was used as a residence from the time of acquisition until sale and the facts fail to show that the purchase and sale thereof was primarily a transaction entered into for profit.
*1128 This proceeding involves a deficiency of $153.75 for the year 1933, resulting from disallowance by the respondent of a claimed deduction of $5,550 which the petitioner alleges is deductible as a loss from the sale of real estate under either subsection (1) or (2) of section 23(e) of the Revenue Act of 1932 and the addition of $250 as net taxable gain asserted by the respondent under section 272(e).
FINDINGS OF FACT.
The petitioner is a resident of Richmond, Virginia, and a member of a partnership engaged in the real estate business. From time to time he purchases real estate himself as an individual with the intention of selling it and making a profit. In July 1929 he owned an unimproved lot on Seminary Avenue in Richmond having a fair market value*794 of $6,000. He ahd disposed of his own home and was living in a house which he rented from month to month. He owned another unimproved lot upon which he intended building a new residence for himself and had engaged the services of an architect to plan a home. In the spring of 1929 his business dropped off and he felt the financial pinch of the depression. He became interested in a piece of property with a residence thereon located on Dupont Circle, Richmond, and believed that this property could be converted into flats to produce income or be sold at a profit. He purchased the *1129 Dupont Circle property for $18,550 in July 1929, the purchase price being paid by giving a deed to the Seminary Avenue lot, worth $6,000, assuming an $8,000 mortgage on the Dupont Circle property, and paying the difference in cash. This transaction was not entered into in the course of petitioner's regular business of buying and selling real estate as an individual or as a member of a partnership. The Dupont Circle property was occupied by a tenant whose lease expired in September 1929. In two months, between the date of the purchase and the expiration of this lease, the petitioner abandoned*795 both of his plans to build a home on property he owned and to convert the Dupont Circle property into flats for income purposes. In September he moved his family into the Dupont Circle house and lived there continuously until November 1933, although he did not intend making it his permanent residence. In May 1933 petitioner sold the Dupont Circle house for $13,000, in a transaction in which he bought property from the buyer, with an agreement to rent the Dupont Circle property at $100 per month from the purchaser until September 1933. Thereafter he started building a new home, but did not move into it until November 1933, continuing to live in the Dupont Circle house on a monthly rental arrangement.
In May 1933, as part of the negotiation for the sale of the Dupont Circle property, the petitioner bought two lots from the buyer of the Dupont Circle property, each worth $5,750. He sold one of the lots immediately for $6,000 realizing a gain of $250. He did not report this profit in his income tax return for the taxable year. It constitutes taxable income.
OPINION.
HARRON: The purchase and sale of the Dupont Circle property was not incurred in the petitioner's regular business*796 and loss therefrom is not allowable under section 23(e)(1). The question in this proceeding is whether or not the transaction was one entered into for profit, though not connected with the petitioner's business, for if it was a transaction entered into for profit the resulting loss is deductible from the petitioner's gross income under the provisions of section 23(e)(2) of the Revenue Act of 1932.
Upon review of the evidence it is held that the loss was not incurred in a transaction entered into for profit. The petitioner's claim is based upon the argument this his business was carried on in two capacities, both as an individual and as a member of a real estate partnership, and that the purchase of the Dupont Circle property was a transaction entered into in the petitioner's separate and individual business of buying and selling real estate. The evidence shows that from 1929 to 1933 the petitioner did not buy and sell real estate *1130 on his own account for profit. During this period, but before the taxable year, he owned a piece of property which he rented to tenants and he held two or three unimproved lots. The purchase of the Dupont Circle property appears to have*797 been made with the intention of using or disposing of the property as would be done in a transaction entered into for profit, but the petitioner abandoned such intention at the start and used the property practically from the time of acquisition until a few months after the date of sale as a residence. It was not used to produce income at any time. From its use, the purchase and sale of the property lost the characteristics of a transaction entered into for profit and was instead a transaction whereby the petitioner acquired a residence until such time as a new residence was completed for his occupancy. Therefore petitioner is not entitled to the deduction under section 23(e)(2). See ; ; affd., .
Petitioner relies upon the rule set forth in , wherein it is stated that "where a taxpayer acquired property with the intention of selling it at a profit, even though he may have resided thereon, if the predominating factor in its selection was the prospect of future profits, he is entitled to any loss sustained upon the sale*798 thereof." Whether or not a loss is incurred in a transaction entered into for profit must be determined by the facts in each proceeding. Where a taxpayer is engaged in the real estate business, it is natural for him to argue that all purchases of real estate are transactions entered into for profit. However, the facts relating to the purchase of the particular piece of real estate may indicate otherwise. In this proceeding, there is no convincing evidence that the petitioner actively and persistently endeavored to dispose of the piece of property involved during the time of his ownership so as to make convincing the argument that the use of the property as a residence was secondary to carrying out a transaction entered into for profit. During four years the house was shown by agents to only three or four people. During the month preceding his occupancy of the property, the petitioner did not do anything towards promoting the sale or rental of the property. It appears that he acquired a residence for his family until the should find it convenient to build his new home. There are lacking facts to show that the predominant factor was a real estate promotion transaction throughout*799 so that the use of the property as a residence was an afterthought brought about through adverse circumstances delaying the carrying out of a real estate transaction as in the cases of ; ; ; ; . The fact that the petitioner did not intend to permanently *1131 use the property for a residence is not sufficient to characterize the transaction as one primarily entered into for profit.
The petitioner realized a gain of $250 from the sale of a lot in May 1933 and is clearly taxable upon this income.
Decision will be entered for the respondent.