Boree v. Commissioner

In 2002, Gregory Boree, doing business as Glen Forest, LLC, purchased 1,892 acres of land in Baker County, Florida, for $965 per acre. Glen Forest submitted a residential-development plan called West Glen Estates (West Glen) to the county. The plan called for over 100 lots to be developed and sold in phases. The county approved the plan and rezoned the property into 10-acre lots. Between 2002 and 2006, Glen Forest sold approximately 60 perimeter lots (about 600 acres) and engaged in substantial development activity. From late 2004 through early 2006, the county imposed several land-use restrictions affecting West Glen, including requirements to pave certain subdivision and county roads. Compliance would have cost Glen Forest over $11.4 million. After failing to obtain an exception, Glen Forest hired an attorney and applied to rezone the property for higher-density residential and commercial use. In early 2006, Boree began negotiating the sale of 1,067 acres of the West Glen property to Adrian Development (Adrian). In August 2006, the county approved Glen Forest’s rezoning request. However, Glen Forest withdrew the proposal and instead applied to rezone the property into 7.5-acre lots. The sale to Adrian closed in February 2007 for approximately $9,500 per acre. A week later, Glen Forest withdrew its remaining rezoning application. Boree reported the gain from the sale as capital gain on his 2007 tax return. The commissioner of the Internal Revenue Service (defendant) assessed a deficiency, reclassifying the gain as ordinary income. Boree petitioned the tax court for a redetermination, arguing that he had purchased the property to hold as an investment and had segregated and sold perimeter lots only to pay off debts. The tax court found that Boree intended to develop and sell the property in the ordinary course of business, and it upheld the IRS’s determination. Boree appealed.