*212 Decision will be entered under Rule 50.
1. Held, on the facts, petitioner was engaged during 1940 and 1941 in the trade or business of selling real estate, and certain properties disposed of were held by him "primarily for sale to customers in the ordinary course of his trade or business" within section 117 (a) (1), I. R. C.
2. Held, loss sustained by petitioner in 1940 on the disposition of apartment and store buildings to others in the course of his trade or business of renting and selling real estate is, on the facts, attributable to the "operation of a trade or business regularly carried on by the taxpayer" within the meaning of section 122 (d) (5), I. R. C., and therefore its inclusion in his net operating loss for 1940 is not subject to the limitation of that section.
3. Petitioner, with his own money, purchased for subdivision and sale, land located in Michigan, and received a deed to the property made to himself and his wife. The property was so deeded by the vendor at the direction of petitioner, who had been advised that certain advantages under local law might thereby be obtained. Petitioner's wife was unaware of the purchase until the property was sold in*213 1941 when, at petitioner's request, she executed with him a deed of conveyance. Held, petitioner was tenant by the entirety of the land and on his individual income tax return for 1941 he may deduct only one-half of the allowable loss sustained on the sale thereof.
*905 On the basis of numerous adjustments to net income respondent determined a deficiency in petitioner's income tax liability for the calendar year 1941*214 in the amount of $ 4,675.61. Some of the assignments of error made in the petition were abandoned at the hearing and only three questions remain for decision. The first two issues are (1) whether loss sustained on the disposal in 1941 of an 80-acre tract of land is deductible as an ordinary loss or as a capital loss, and (2) whether petitioner had a net operating loss carry-over from the taxable year 1940 by reason of losses sustained on the disposition in that year of certain real estate properties. Both of these issues will be determined by the nature and extent of petitioner's real estate activities in the calendar years 1940 and 1941. The third issue is whether petitioner may deduct all of the allowable loss sustained on the disposition of the 80-acre tract, or whether he may deduct only one-half of such loss by reason of the fact that the property was held by him and his wife as tenants by the entirety. The record consists of oral testimony and exhibits.
FINDINGS OF FACT.
Petitioner is an individual, residing in Bloomfield Hills, Michigan. His individual income tax return for the taxable year 1941 and the joint return of him and his wife, Amy L. Morley, for the taxable *215 year 1940 were filed with the collector of internal revenue for the district of Detroit, Michigan.
Petitioner and seven other persons organized the Crystal Lake Realty Co., hereinafter referred to as Realty Co., a corporation under the laws of the State of Michigan, on September 25, 1916. From December 15, 1916, until the dissolution of the corporation on November 12, 1942, with the exception of the period from December 15, 1922, to May 25, 1925, inclusive, petitioner was the largest stockholder and secretary-treasurer of Realty Co. During this same period *906 petitioner, his three sisters, brother, son, daughter and son-in-law were the owners of more than 55 per cent of the corporation's outstanding stock. During the period excepted above petitioner's record stockholdings were reduced only by reason of his transfer of shares of stock as collateral for loans.
During its corporate existence Realty Co. was engaged in the subdivision and development for sale of 3 farms consisting of 302 acres situated at the south end of Pontiac, Oakland County, Michigan. Petitioner was the only stockholder active in the corporation and he supervised all of its sales and administrative activities. *216 The office of Realty Co. was, during its entire life, in the office of petitioner.
The 302 acres acquired by the corporation were divided into 4 subdivisions, namely, the Crystal Lake subdivision, consisting of 360 lots; the Wilson Park subdivision, consisting of 358 lots; and Bloomfield subdivisions #1 and #2, containing together 132 lots. A fifth subdivision was contemplated, but before the lots were laid out the land was sold as acreage to the city of Pontiac. In exploiting the platted subdivisions the corporation had roads and sidewalks laid, landscaped the ground, and generally developed the property for sale. Three houses were constructed by the corporation and were sold with the lots. Four lots were given to the Catholic Church for use as a church construction site. Of the approximately 850 lots originally owned by Realty Co. 816 were sold from 1917 to 1931. The remaining lots were subsequently lost on scavenger sales because of some $ 140,000 in delinquent taxes. Also lost on scavenger sale was the equity of the Realty Co. in many of the land contracts by which the lots were sold. After these scavenger sales only 2 properties were owned or disposed of by Realty Co., *217 these being a gasoline filling station and stores, and an old brick farm house. After the sale of these 2 properties in 1941 the corporation had approximately $ 3,400 in cash, which it paid to its stockholders in 2 dividends. In 1942 Realty Co. was dissolved.
The sales of lots by the corporation were generally accomplished through real estate brokers. The depression of the 1930's was the cause of the failure of Realty Co. to sell the lots which it held subsequent to 1931. The Pontiac area was hard hit financially and many people were on welfare. Prices were reduced on the remaining lots, however, and effort was made to sell them. After 1931 there was some corporate activity in connection with collections and efforts to collect from persons to whom sales had been made. There were many defaults on land contracts of vendees from the corporation, but no effort was made to repossess the properties.
From 1917 to 1931, inclusive, petitioner purchased 67 lots from Realty Co. at an aggregate cost of $ 24,850, and built 34 houses on these lots. This activity on the part of petitioner was undertaken to *907 promote the business of the corporation and to profit individually. During*218 the period that petitioner was connected with the corporation he drew no salary, but he did receive some commissions on sales which he made for the corporation. In 1941 he received from the corporation $ 435.84 as commission on the sale of the gasoline filling station and stores.
The following schedules summarize petitioner's real estate activities in his individual capacity during the years 1920 to 1941, inclusive, and the net gain or loss therefrom as reported in petitioner's income tax returns for the respective years:
| Number of | Rental | Net income | |
| Year | properties | income | or (loss) |
| 1920 | 3 | $ 2,148.59 | $ 2,148.59 |
| 1921 | 3 | 2,421.24 | (1,355.43) |
| 1922 | 3 | 11,941.12 | (2,898.40) |
| 1923 | 3 | 14,454.36 | (101.93) |
| 1924 | 2 | 16,658.50 | 3,477.98 |
| 1925 | 2 | 17,150.00 | 4,828.13 |
| 1926 | 4 | 22,292.06 | 852.86 |
| 1927 | 7 | 29,449.08 | (4,747.33) |
| 1928 | 6 | 27,827.09 | (7,289.66) |
| 1929 | 8 | 28,323.18 | (11,296.89) |
| 1930 | 9 | 24,414.34 | (12,354.79) |
| 1931 | 7 | $ 15,699.95 | ($ 14,849.63) |
| 1932 | 9 | 13,993.11 | (18,038.19) |
| 1933 | 8 | 8,138.24 | (10,898.25) |
| 1934 | 9 | 10,942.99 | (7,189.16) |
| 1935 | 10 | 14,372.07 | (6,049.92) |
| 1936 | 7 | 10,669.86 | (4,615.18) |
| 1937 | 7 | 12,758.52 | (3,869.56) |
| 1938 | 7 | 10,217.51 | (5,916.60) |
| 1939 | 7 | 11,079.71 | (2,241.81) |
| 1940 | 5 | 7,290.89 | (1,204.64) |
| 1941 | 2 | 4,616.80 | (487.05) |
| Properties | Properties | Net profit | |||
| Year | acquired | Cost | sold | Sale price | or (loss) |
| 1920 | 16 | $ 12,696.25 | 3 | $ 67,100.00 | $ 8,082.00 |
| 1921 | 1 | 99,000.00 | |||
| 1922 | 4 | 61,080.00 | |||
| 1923 | 2 | 8,370.00 | 1 | 24,000.00 | 4,800.00 |
| 1924 | 12 | 23,165.00 | 3 | 18,100.00 | 7,053.00 |
| 1925 | 11 | 70,925.00 | |||
| 1926 | 9 | 209,364.34 | 2 | 226,100.00 | 65,924.69 |
| 1927 | 8 | 111,933.97 | 6 | 137,486.24 | 89,336.25 |
| 1928 | 3 | 7,300.00 | 2 | 7,200.00 | 1,593.36 |
| 1929 | 1 | no record | 1 | 8,338.96 | (1,661.04) |
| 1930 | 3 | 6,727.90 | 3 | 7,200.00 | 1,907.29 |
| 1931 | 2 | 23,068.00 | |||
| 1932 | |||||
| 1933 | |||||
| 1934 | |||||
| 1935 | |||||
| 1936 | |||||
| 1937 | |||||
| 1938 | |||||
| 1939 | |||||
| 1940 | 3 | 2,000.00 | (51,038.68) | ||
| 1941 | 2 | 6,800.00 | (5,348.10) |
On July 20, 1927, petitioner purchased on land contract 52 acres of land, hereinafter referred to as the South Boulevard property, which was located east of Pontiac and about 4 miles from the Yellow Cab & Coach Co. factory. The contract purchase price of this property was $ 45,433, and payments were to be made over a period of 10 years. Petitioner had the property surveyed for subdivision and a map dated February 1, 1929, was made at his direction by a civil engineer. Petitioner later added 2 additional acres to this property to increase*220 the *908 depth of the lots and the resulting total acreage contained 272 lots. Because of the depression commencing in 1929, with the resulting lack of demand for real estate, petitioner did not subdivide this property and no steps were then taken in development of the property for that purpose. He has never made any sales from this property. The property was not advertised for sale in 1940 or 1941. This failure to advertise was due to petitioner's belief that there was no market for the sale of such suburban property and that advertising would therefore be futile. Business conditions in Detroit began to improve about 1936 and there was a marked improvement in the real estate market in 1939 or 1940. During December 1945 petitioner was contacted by several persons who were interested in purchasing lots and as a result thereof he had the South Boulevard property cleared of brush and put in shape for construction of houses thereon. The value of this property was enhanced by the wartime construction by the Yellow Cab & Coach Co. of a 5-mile paved road from Pontiac to Rochester Road. The South Boulevard property is about 12 miles from petitioner's home.
About 1930 petitioner*221 acquired residence property, located on the east side of Pontiac and known as the Osmun Street property, in exchange for a residence, some vacant lots, and the assumption of a $ 2,000 mortgage. The residence given by petitioner in the exchange was one of three houses which he built in the Crystal Lake subdivision on land acquired from the Realty Co. Petitioner was unable to sell these houses, and therefore, made this trade with the belief that by getting someone to live in one of the three houses the sale of the other two would be stimulated. He also thought that the Osmun Street property could be sold more readily than the Crystal Lake property given in the exchange. From its acquisition until 1941 petitioner rented or tried to rent the Osmun Street property, but each year it was operated at a loss. At times it was unrented and at other times the tenants, who were living on public welfare, did not pay the rent due. Petitioner spent some money for repairs and improvements to the house. Petitioner listed the property for sale with real estate brokers, but the several offers they brought him prior to 1941 were unsatisfactory. In 1941 a broker sold the Osmun Street property for*222 petitioner at a satisfactory price.
From 1916 to 1926 petitioner, in addition to carrying on real estate activities, was a stockholder and officer or an employee of the John W. Brown Manufacturing Co. of Columbus, Ohio, hereinafter referred to as Brown Co. This company was engaged in the business of manufacturing and selling various kinds of automobile lamps. When first connected with Brown Co. petitioner was manufacturer's agent, and his success in that position resulted in his becoming an officer of *909 the company. He continued to act as sales agent and to maintain and individually to pay the expenses of an office in Detroit. This employment was not on a time schedule however and petitioner devoted whatever time was necessary to his personal real estate affairs and to those of Realty Co. For this purpose he was in Pontiac at least every Wednesday and every Saturday during that period.
When petitioner's connection with Brown Co. ceased in 1926 because the company was purchased by the Auto Lite Co., petitioner devoted himself exclusively to real estate activities. In 1931 he became executor of the estate of Timothy Donovan, who on his death was the owner of the Donovan*223 Building Co. Petitioner became president of the Donovan Building Co., and in that capacity he managed numerous business properties which were under lease to industrial and mercantile concerns. When he was discharged as executor of the estate in 1933 he received the usual executor's fees. During the period of his executorship petitioner continued to devote whatever time was necessary to his real estate interests and those of Realty Co. Because of certain court matters in Pontiac in connection with the Donovan affairs, petitioner was able to visit his properties there more frequently than he had from 1916 to 1926.
From early in 1934 to April 1935 petitioner was engaged in managing his real estate affairs and in investigating various business opportunities. During this period there was relatively little income to petitioner from his real estate holdings and taxes and interest had accumulated to the point that petitioner's financial affairs reached a critical stage. He continually but unsuccessfully attempted to sell properties which he owned at that time.
In April 1935 petitioner promoted and became connected with the Steel Plate & Shape Corporation, which owned a steel warehouse*224 and fabricated steel products. Petitioner and members of his family had a controlling interest in this corporation and petitioner was its vice president until 1941, when he became president and treasurer. Petitioner's compensation from this corporation for the years 1935 to 1941, inclusive, was as follows:
| 1935 | $ 3,600.00 |
| 1936 | 5,700.00 |
| 1937 | 7,400.00 |
| 1938 | 10,444.28 |
| 1939 | $ 7,080.00 |
| 1940 | 9,142.39 |
| 1941 | 22,306.14 |
In spite of the fact that during 1940 and 1941 the Steel Plate & Shape Corporation operated 52 hours a week in war production, petitioner was able to and did give whatever time was necessary from 1935 to 1941, inclusive, to the pursuit of his real estate activities. There was no active sale in the Pontiac area, but problems arose with respect to petitioner's property holdings there and he was in Pontiac in that *910 connection every Saturday and occasionally in the morning on other days. At times he visited his various rental properties in the late afternoons, seeing caretakers and rent collectors. Because of his financial commitments petitioner was unable to discontinue these real estate activities. In 1939 and 1940 banks sued him for deficiency judgments*225 in connection with his past real estate transactions.
For several years prior to 1938 and during the years 1938 to 1946, inclusive, petitioner held a real estate broker's license in the State of Michigan. When petitioner first secured such license, the passage of an examination was not a prerequisite to its issuance, but it later became so, except in cases of renewal. In his real estate activities petitioner did not seek commission income as a broker.
During the period when petitioner was connected with the Steel Plate & Shape Corporation he kept his real estate records and conducted his real estate affairs in the office of that company. At all other times after his release as executor of the Donovan estate he maintained an office in the Fisher Building or in the Stephenson Building, both in Detroit, and his real estate records were kept in these offices.
In the city directories of Detroit for the years 1937, 1938, 1940, and 1941 petitioner was listed as an officer of the Steel Plate & Shape Corporation. He was not listed in the years 1936 or 1939, but in the directories for 1930-1931, 1934, and 1935 his occupation was designated "real estate." In the directories for the years*226 1931-1932 and 1932-1933 he was listed as an officer of the Donovan Building Co.
On his income tax returns for the calendar years 1933 and 1934 petitioner stated that his principal occupation or profession was "real estate" and that his employer was the Donovan Building Co. in 1933 and the Donovan estate in 1934. He reported salary received in those years as $ 625 and $ 1,000, respectively. On his tax return for the year 1935 petitioner did not state his principal occupation, but for the years 1936 to 1941, inclusive, his occupation was stated to be "executive." From 1935 to 1941, inclusive, petitioner reported that his employer was the Steel Plate & Shape Corporation. On his 1941 income tax return, under schedule H, entitled "Profit (or Loss) from Business or Profession," petitioner stated that the nature of his business was "real estate," and he showed rental income, gain or loss on the sale of property, and expenses incurred in his real estate activities. The only report made of real estate commissions received during the years 1933 to 1941, inclusive, was $ 100 in 1933 and $ 435.84 in 1941.
On July 2, 1940, petitioner surrendered to the mortgage holder a property hereinafter*227 referred to as the Pallister & Churchill Streets property. This property, situated in Detroit, was acquired by petitioner prior to 1920, subject to a $ 20,000 mortgage. On the land were *911 a frame building and a 2-story apartment building containing 8 apartments and 2 stores. In 1920 petitioner sold the property, but the purchaser subsequently failed to pay the taxes due and to make the due mortgage payments. The mortgagee then threatened to start proceedings against petitioner on the mortgage note, and about 1932 petitioner took over the property from his vendee and operated it in an attempt to pay off the mortgage. He listed the property with a real estate dealer, who brought him an offer which was rejected by petitioner because it did not entirely relieve him of liability on the mortgage note. Other efforts of petitioner to sell the property were also unsuccessful and, after several years of operation at a loss or with very small profit, he surrendered it to the mortgagee. By the surrender petitioner sustained a loss in the amount of $ 4,084.48, of which $ 942.43 is apportionable to the land and the remaining $ 3,142.05 is apportionable to the buildings.
On January*228 9, 1940, petitioner formally forfeited his interest as vendee in a land contract on property located at 2930 West Grand Boulevard, Detroit, Michigan. The contract of purchase had been executed by petitioner and the owner, Catherine Sullivan, on December 15, 1926. This property consisted of a four-family apartment building and was located within less than a block of where the Fisher Building was about to be erected. Petitioner purchased the property because he thought that the erection of the Fisher Building would bring about much building activity in the area, with a resultant demand for sites for the erection of large buildings. He believed that he would be able to resell this property at a profit, but this anticipated demand did not materialize, however, and in every year subsequent to its acquisition petitioner operated the property at a loss. It was listed for sale by petitioner with a real estate dealer, but no satisfactory offer was obtained. On forfeiting his interest in the property to Mrs. Sullivan petitioner sustained a loss of $ 30,619.55, of which $ 23,109.78 is apportionable to the land and the remaining $ 7,509.77 is apportionable to the building thereon.
On December*229 21, 1925, petitioner purchased by land contract with Eli F. Brondige and wife 80 acres of land located in Oakland County, Michigan, between Pontiac and Holly near the village of Davisburg, which is about 40 miles from Detroit. This land was not tilled and has not since been used as farm land. The purchase price set forth in the contract was $ 9,000, of which $ 2,500 was paid at the time of the purchase and the balance was to be paid over a period of years. On December 21, 1931, there was an unpaid balance of $ 3,500 owed by petitioner and on February 13, 1933, he entered into a written agreement with the vendors whereby it was agreed that he would assume a $ 700 mortgage owned by the vendors and in addition would *912 pay them $ 800 in cash. In consideration thereof Brondige and wife agreed to execute the deed for the property and to release petitioner from further liability on the purchase contract. The terms of this agreement were carried out and on August 8, 1933, the vendors made a deed to petitioner and Amy L. Morley, his wife, subject to the $ 700 mortgage.
The land consisted of rolling land and included a small lake. Petitioner bought and held it as acreage only *230 because he thought this land could be subdivided into large parcels and sold as building sites for fine residences with lake frontage. At the time of acquisition he believed that the Grand Trunk Railroad would establish an interurban line between Holly and Detroit, which line would have a stop about three-quarters of a mile from the acreage. There had been some talk of the establishment of such interurban service just prior to December 21, 1925, and petitioner believed that this line would make the land very desirable for residential purposes. The railroad did not extend its line to Holly, but petitioner did not abandon his hope that the line would be established, nor did he abandon his plans for eventually subdividing the farm. He did not, however, actually subdivide or otherwise develop the land for sale. Finally, petitioner was hard-pressed for money and listed the property for sale with a real estate dealer in Pontiac, who brought him an offer of $ 2,000. Petitioner accepted the offer in 1941 and the property was conveyed to the purchaser in that year.
The entire purchase price of the 80 acres, including the amount to discharge the mortgage, was paid by petitioner by check*231 drawn against his own funds in a bank account upon which his wife was not privileged to draw. Petitioner's wife was unaware of the purchase until 1941, when she executed the deed of conveyance. Petitioner directed the vendors to deed the property to him and his wife jointly, because he had been advised by his attorneys that land so acquired would not, in the event of his death, be subject to probate proceedings or to the Michigan inheritance tax. Petitioner understood that title so taken constituted under the laws of Michigan an estate by the entireties, and he understood the general nature of such an interest. Title to other property was also taken by petitioner as tenant by the entirety.
About 1915 petitioner and his wife acquired as tenants by the entireties a 25-acre farm on which they lived until about 1923, and on 6 acres of which they lived for several years prior to 1945. Portions of this 25-acre tract were sold by petitioner from time to time as Cranbrook, Cranbrook Place, and Brooknoll, and another portion was exchanged for property known as 67-68 University Place, title to which was taken in the names of petitioner and his wife as tenants by the entireties, and which, *232 in turn, was sold. Cranbrook Place and 67-68 University *913 Place were unimproved when sold by petitioner. On each of these sales a profit was realized. This profit was reported by petitioner for income tax purposes as one-half taxable to himself and one-half to his wife. Petitioner so reported the gain because he regarded those properties as held outside of his ordinary real estate activities. The gain realized on the disposition of other properties held by petitioner and his wife by the entireties was reported as taxable entirely to him.
In his income tax return for 1941 petitioner deducted $ 5,000 as loss sustained on the disposition of the 80-acre farm. He also deducted $ 9,425.37 as "Unused Portion of 1940 Loss from Business." This latter item was the deficit item shown as net income on the joint return of petitioner and his wife for the calendar year 1940. In his 1940 return petitioner had deducted $ 13,630.35 as net long term losses from the sale or exchange of capital assets, which amount included 50 per cent of a reported loss of $ 22,633.15, i. e., $ 11,316.57, from the disposition of the land located at 2930 West Grand Boulevard and 50 per cent of a reported*233 loss of $ 1,160.13, i. e., $ 580.07, from the disposition of the land at Pallister & Churchill Streets. In the 1940 return a further deduction of $ 11,478.73 was taken by petitioner as net loss from the sale or exchange of property other than capital assets, which amount included a reported loss of $ 7,033.15 on the disposition of the building located on West Grand Boulevard, a reported loss of $ 5,112.25 on the disposition of the buildings on the Pallister & Churchill Streets property, and gain in the amount of $ 666.67 on the sale of a frame building which had been acquired on March 18, 1931.
Petitioner's Exhibit 3 is an analysis showing the segregation between petitioner and his wife of items of gross income deductions and losses, "per joint income tax return of Walter G. and Amy L. Morley for the calendar year 1940 as adjusted." Respondent concedes the accuracy of the figures therein contained. We incorporate this exhibit herein by reference.
In the deficiency notice with respect to petitioner's tax liability for the calendar year 1941 respondent disallowed the claimed business loss carry-over from 1940 for the reason that "It is held that you were not engaged in the real estate*234 business during the years 1940 and 1941 * * *." Respondent also reduced the deductible loss from the disposition of the 80-acre farm from the $ 5,000 claimed to $ 1,250 and explained this adjustment as follows:
It has been determined that the transaction involving a sale of 80 acres of land in 1941 resulted in a long-term capital loss under section 117 (a) of the Internal Revenue Code in the amount of $ 5,000.00, of which 50 percent is deductible in the amount of $ 2,500.00. It is further held that since said property was owned jointly by yourself and your wife, only one-half of said amount is deductible by you for the year 1941, or the amount of $ 1,250.00 instead of $ 5,000.00 as claimed in your return for said year.
*914 Petitioner claims, in the petition and on brief, that a 1941 net operating loss deduction should be allowed in the amount of $ 21,405.37. This amount is computed by petitioner on the theory that the loss sustained in 1940 on the disposition of real estate properties was properly deductible by him in full as ordinary loss rather than, with respect to either land or buildings, limited as capital loss, and that all of such deduction is includible in computing*235 his 1940 net operating loss for carry-over to 1941. Petitioner also alleges error by the respondent in reducing by any amount the loss deducted with respect to the 80-acre farm.
Petitioner was engaged during the calendar years 1940 and 1941 in the trade or business of selling and renting real estate.
The losses in question were attributable to the operation of a trade or business regularly carried on by petitioner.
OPINION.
As to the first and second issues petitioner contends that during each of the calendar years 1940 and 1941 he was "regularly engaged in the trade or business of buying and selling real estate, and generally dealing in real estate and in the operation of income-producing property." It is argued therefrom (1) that 2930 West Grand Boulevard, the Pallister & Churchill Streets property, and the 80-acre tract of land 1 were held by petitioner "primarily for sale to customers in the ordinary course of his trade or business" and thus were not capital assets as defined in section 117 (a) (1) of the Internal Revenue Code, or, in the alternative, that the buildings on the first two of those holdings were not capital assets under section 117 (a) (1), since they were "property, *236 used in the trade or business, of a character which is subject to the allowance for depreciation," and (2) that no part of the deductible losses with respect to the West Grand Boulevard property or the Pallister property is excluded by section 122 (d) (5)2 from petitioner's 1940 net operating loss, since that section only *915 excepts and limits allowable deductions which are "not attributable to the operations of a trade or business regularly carried on by the taxpayer."
*237 We are of the opinion that during each of the calendar years 1940 and 1941 petitioner was engaged in the trade or business of selling real estate, and that 2930 West Grand Boulevard, the Pallister & Churchill Streets property and the 80-acre tract of land were held by petitioner "primarily for sale to customers in the ordinary course of his trade or business." These three properties, therefore, were not capital assets as defined in section 117 (a) (1). 3Richards v. Commissioner, 81 Fed. (2d) 369, affirming 30 B. T. A. 1131; Welch v. Solomon, 99 Fed. (2d) 41; Snell v. Commissioner, 97 Fed. (2d) 891; Ehrman v. Commissioner, 120 Fed. (2d) 607; Oliver v. Commissioner, 138 Fed. (2d) 910; Gruver v. Commissioner, 142 Fed. (2d) 363, affirming 1 T. C. 1204; A. R. Calvelli, 43 B. T. A. 6; Neils Schultz, 44 B. T. A. 146; Charles H. Black, Sr., 45 B. T. A. 204.*238
The record indicates that petitioner acquired each of the properties here in question with the intention of selling it at a profit. It does not appear that he purchased any of the properties with the purpose of realizing income from the rental thereof. Petitioner acquired the 80-acre tract of land not as a farm or an investment, but because he thought the interurban line would be established and that he would be able to realize profit on the sale of lots carved out of the farm acreage. Petitioner actually sold the Pallister*239 & Churchill Streets property in 1920, and reacquired it in 1932 only after the vendee defaulted. The West Grand Boulevard property was purchased because he thought he would be able to resell it at a profit by reason of a demand for land in the vicinity of the Fisher Building which he expected to develop.
None of these transactions was "an isolated holding dissimilar from any other transaction and unrelated to the history of petitioner's activities * * *." See Julius Goodman, 40 B. T. A. 22. Petitioner carried on real estate operations for gain for many years prior to 1931. His operations were extensive, frequent, regular, and diversified from the standpoint of the number and type of properties involved. He realized substantial profits from his real estate operations prior to 1931. It is true that after 1931 petitioner's purchases and sales of property virtually ceased, but we are not convinced that he abandoned *916 his business of selling real estate. Petitioner's activity was not restricted or halted by reason of any change in his plans or purpose, but rather by the force of economic circumstances beyond his control and not of his making. *240 The general business depression of the past decade was the reason for the curtailment of petitioner's activity. We can not ignore the realities of the situation. It was the depression which prevented petitioner from selling at a profit real estate which he had purchased for sale. The market for real estate in large industrial areas, such as Detroit, became virtually nonexistent during that period, and petitioner was compelled to become inactive as a seller of real estate until conditions improved so that he could work his way out of his difficulties and again sell at a profit the real estate which he had purchased. But before he was able to dispose of the properties here in question at a profit, petitioner was forced to sell or relinquish them at the substantial losses, which are now at issue. Although certainly not determinative of the problem here before us, we think that the resurgence of petitioner's activities with respect to the South Boulevard property shortly prior to the hearing of this case is a fact indicating that petitioner did not abandon his business of selling real estate, as is also the fact that petitioner has continued to keep his real estate broker's license*241 alive.
The fact that petitioner was also engaged in other business activities did not preclude him from engaging in the real estate business at the same time, for an individual can be engaged in more than one trade or business. Snyder v. Commissioner, 295 U.S. 134">295 U.S. 134, 139; Oliver v. Commissioner, supra;Snell v. Commissioner, supra;Ignaz Schwinn, 9 B. T. A. 1304, 1308.
Having sustained petitioner's first contention that the three properties here involved were not "capital assets" within the meaning of section 117 (a) (1), we need not consider petitioner's alternative contention with respect to the buildings on the West Grand Boulevard and Pallister & Churchill Streets properties.
With respect to the loss sustained in 1941 on the disposal of the 80 acres of land, petitioner's contention that the loss is deductible in 1941 as an ordinary loss is sustained.
Petitioner's losses in 1940 were attributable to the operation of a trade or business regularly carried on by the petitioner and, therefore, the taxpayer must be also sustained in his contention that no part*242 of the deductible losses with respect to the West Grand Boulevard or the Pallister & Churchill Streets properties is excluded by section 122 (d) (5), supra, in the computation of his net operating loss carry-over from 1940.
We are aware of the difference in phraseology between section 23 (e) and section 122 (d) (5), in that the latter, in addition to the *917 requirement that the loss be incurred in a trade or business, requires that it be attributable to a trade or business regularly carried on by the taxpayer. While we incline to the view that the business of selling real estate was one regularly carried on by petitioner in 1940, it is not necessary to our conclusion on this point for us to hold, or find, that the losses in question were attributable to the operation of a business regularly carried on by the taxpayer in that year. It is sufficient for our conclusion that we find, as we have done, that the losses in question were attributable to the operation of a business regularly carried on by petitioner. Edgar L. Marston, 18 B. T. A. 558; affirmed sub nom. Burnet v. Marston, 57 Fed. (2d) 611. Cf. *243 Lewis G. Carpenter, 33 B. T. A. 1. There can be no question but that the business of buying and selling real estate was regularly carried on by petitioner prior to 1931. The properties here in question were purchased or acquired by petitioner for resale at a profit before that date. Even though we should assume, arguendo, that the business of selling real estate, although engaged in by petitioner in 1940, was not one regularly carried on by him in that year, nevertheless, we would conclude that the losses in question were attributable to a business of buying and selling real estate which was regularly carried on by him in years prior to 1940; and this conclusion would render inoperative the limitation of section 122 (d) (5).
The third issue is whether petitioner may deduct all of the allowable loss sustained on the disposition of the 80 acres of land in 1941, or whether, as respondent determined, he may deduct only one-half thereof, since the property was acquired and held by him and his wife as tenants by the entireties. Petitioner recites the axioms that substance prevails over form and that income is taxable to him who earns it, and he contends*244 that, since he paid for the property from his own funds and at all times exercised dominion over it, and since title was taken jointly only for convenience, he was the real owner, sustained the whole loss, and is entitled to the entire deduction therefor.
Petitioner does not contend that the circumstances surrounding the acquisition and retention of this land render inoperative the rule of Michigan law that conveyance to a husband and wife creates a tenancy by the entireties. Petitioner understood at that time that such an estate was created by the conveyance of the land and it seems clear that his understanding was correct. Commissioner v. Hart, 76 Fed. (2d) 864; Paul G. Greene, 7 T. C. 142. With respect to their income tax effect, circumstances of acquisition similar to those here were recently considered by us in Paul G. Greene, supra, and they were held not to vary the well settled rule that income from an estate by the entireties under the laws of Michigan is taxable one-half to each *918 of the tenants. See also Commissioner v. Hart, supra;*245 H. D. Webster, 4 T.C. 1169">4 T. C. 1169, 1174; Herman Gessner, 32 B. T. A. 1258. We think it follows as a necessary corollary thereto that petitioner, as tenant by the entirety of the land, may deduct only one-half of the allowable loss sustained on its sale. Anna S. Whitcomb, 37 B. T. A. 806, 812; affd., 103 Fed. (2d) 1009; Edwin F. Sandberg, 8 T.C. 423">8 T. C. 423. We so hold.
Decision will be entered under Rule 50.
Hill, J., dissenting: I disagree with the holding of the majority (1) that the loss sustained on the disposal in 1941 of an 80-acre tract of land was an ordinary and not a capital loss and (2) that petitioner sustained a net operating loss in 1940 entitling him to a deduction therefor in 1941.
The underlying question, determinative of both points, is whether the properties in respect of which loss deductions are claimed by petitioner were disposed of by him in carrying on the business of buying and selling real property.
The 80-acre tract of land in question was purchased in December 1925, four years before the 1929 "crash" which*246 initiated the depression of the early 1930's. This property was purchased in anticipation of an enhancement of its market value as a subdivided residential area, based on the "talk" that a railroad would be built near the land. Apparently the purchase was deemed a good investment. The railroad was not built and petitioner did not subdivide the land or otherwise develop it for sale. Petitioner sold the land in 1941 and sustained the loss which he seeks to deduct as an ordinary, rather than a capital, loss. In my opinion, this property was a capital asset and the loss sustained thereon was a capital loss. Regardless of whether petitioner may be held to have been carrying on a real estate business in respect of other properties, I think the evidence establishes that this 80-acre tract was not held by petitioner for sale in the regular course of a real estate business and was not so disposed of by him.
The properties in respect of which the claimed net operating loss was sustained in 1940 are the Pallister & Churchill Streets property and the property at 2930 West Grand Boulevard, dealt with in the majority report.
The Pallister & Churchill Streets property was acquire by petitioner*247 prior to 1920 and was sold by him in that year, subject to an outstanding mortgage which was assumed by the purchaser. Petitioner repossessed the property in 1932 because of the vendee's default in paying taxes and making the mortgage payments. Petitioner held and *919 operated the property as rental property until July 2, 1940, and then surrendered it to the mortgagee. The rental operation resulted in the various years thereof either in a loss or a very small profit. Petitioner endeavored unsuccessfully to sell the property to relieve him of the mortgage obligation. By the surrender of the property to the mortgagee petitioner sustained a loss of $ 4,084.48, which he claimed was an operating loss incurred in carrying on a real estate business. Such loss is one of the two items in the computation of the claimed net operating loss of 1940 sought to be carried over and deducted in 1941. It appears to me from a mere statement of the facts that petitioner did not hold this property for sale in the regular course of carrying on a real estate business and did not so dispose of it. I think, therefore, that the loss sustained in respect of such property was a capital loss and *248 not includible in the computation of a net operating loss.
The Grand Boulevard property was a four-family apartment building and was acquired by land contract in December 1926 in anticipation that much activity would occur in the neighborhood. Petitioner was disappointed in this anticipation. He forfeited his interest in the property to the vendor in January 1940 and sustained a loss of $ 30,619.55, which he claims was an operating loss sustained in carrying on a real estate business. Such a loss is the other of the two items in question here in the computation of the claimed net operating loss of 1940 sought to be carried over and deducted in 1941.
It appears to me evident that petitioner purchased the Grand Boulevard property because he deemed it a good investment. The fact that it turned out otherwise does not alter the motive for the purchase. He held this property for 3 years prior to the financial debacle in 1929. He also held it for a number of years after the depression period of the 1930's. It is true that petitioner contends that he had no "satisfactory" offers of purchase for the property. What constitutes a satisfactory offer of purchase might vary within the range*249 from a salvage price to a price yielding a thousand per cent profit. Therefore, the fact that petitioner did not receive a satisfactory offer of purchase contributes little, if anything, toward the solution of the question we have before us. However, it would seem that under the circumstances here the withholding of a piece of property from sale for 14 years eliminates that property from the category of property held for sale to customers in regular course in carrying on a real estate business.
Petitioner's basic contention in support of his claim that the losses sought to be deducted herein is that throughout the years from 1916 to 1941, inclusive, he was engaged in regularly carrying on the business of buying and selling real estate. In his efforts to show he was so engaged, petitioner presented evidence of his real estate activities and *920 also of the real estate operations of the Crystal Lake Realty Co., of which he was the managing executive and the controlling stock of which was owned by petitioner and his family. He also presented evidence of his activities as a real estate broker in selling property for others on commission.
It should be pointed out that the Lake*250 Realty Co.'s real estate business was not a business carried on by petitioner. He was merely the managing official of that corporation in carrying on its business. Likewise, petitioner's activities in selling real property for others on commission or as a broker does not constitute a business on his part of buying and selling real estate.
We are concerned here with the question of whether the losses here sought to be deducted were sustained in respect of property which petitioner, himself, held and disposed of in carrying on the business of buying and selling real estate. We are not concerned with the business he may have conducted as a real estate broker or as a representative of the Realty Co. We can, therefore, eliminate from consideration all of petitioner's activities in either of the latter two capacities.
Pertinent to the question of whether petitioner in his own right was engaged in the real estate business, the record discloses that petitioner was in the business of renting real properties from 1920 to 1941, inclusive. The record also discloses that he was in the business of buying and selling real property from 1920 to 1931, inclusive. It is further disclosed in the*251 record that from 1932 to 1939, inclusive, petitioner neither bought nor sold any real property, but that his livelihood came exclusively from activities in other lines of endeavor.
I shall not go into a detailed analysis of the evidence, since to do so would unduly prolong the space occupied for this opinion. I shall, however, point to the ultimate facts which I think the evidence warrants. But first I venture the statement that mere intent, without more, to carry on a business does not constitute the carrying on of a business. The above mentioned ultimate facts are (1) that 9 years prior to 1940 petitioner abandoned the real estate business and during that 9-year period he was at no time engaged in the carrying on of a real estate business, (2) that neither in 1940 nor 1941 did petitioner resume or engage in the real estate business and, (3) that in any event, neither the 80-acre tract of farm land, the Pallister & Churchill Streets property, nor the Grand Boulevard property was held for sale or exchange in the regular course of carrying on a real estate business.
In my conception, the carrying on of a business requires business transactions with reasonable regularity. Where *252 no business transactions have occurred for 9 years in respect of a business formerly carried on, I would say that the business is dead and not merely sleeping. As *921 I see it, petitioner's sole reliance in support of his contention that he was engaged in the real estate business throughout the years subsequent to 1916 is that, notwithstanding a period of 9 years of inactivity in buying and selling real estate, he intended to resume such activities when conditions in the real estate business should improve. It is my opinion that an intent to resume a business formerly carried on if, as, and when the conditions in that business should improve, would become too anemic after the lapse of 9 years to stimulate a pulsation of life in the stilled heart of such business.
Therefore, it is my opinion that the losses herein sought to be deducted were capital, and not ordinary, losses and should be allowed as deductions only to the extent allowed by respondent.
Footnotes
1. Petitioner does not contest respondent's determination that sale of the Osmun Street property yielded net gain rather than net loss, as reported by petitioner, and there is no dispute here as to the actual amount of loss sustained on the other dispositions in 1940 and 1941, or as to its apportionment between land and buildings.↩
2. SEC. 122. NET OPERATING LOSS DEDUCTION.
(a) Definition of Net Operating Loss. -- As used in this section the term "net operating loss" means the excess of the deductions allowed by this chapter over the gross income, with the exceptions and limitations provided in subsection (d).
* * * *
(d) Exceptions and Limitations. -- The exceptions and limitations referred to in subsections (a), (b) and (c) shall be as follows:
* * * *
(5) Deductions otherwise allowed by law not attributable to the operation of a trade or business regularly carried on by the taxpayer shall (in the case of a taxpayer other than a corporation) be allowed only to the extent of the amount of the gross income not derived from such trade or business. * * *↩
3. SEC. 117. CAPITAL GAINS AND LOSSES.
(a) Definition. -- As used in this title --
(1) Capital assets. -- The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include * * * property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 23 (l)↩.