Silvia Mendes a new client of yours, owns various plots of land in Fulton County, Georgia. She acquired the land at various times during the last 20 years. About every five years, Silvia subdivides into lots one of the properties she owns. She then has water, sewer, natural gas, and electricity hookups put in each lot and paves new streets. She has always treated the sales of such lots as sales of capital assets.
Her previous tax returns were prepared by an accountant whose practice you recently purchased. Has the proper tax treatment been used on the prior tax returns? Write a 1-2 page memo to the client file with your conclusion. Be sure to include primary source citations.
Partial list of research aids:
§§ 1221 and 1237.
https://www.irs.gov/pub/irs-drop/rr-07-37.pdfhttps://www.irs.gov/publications/p544
