A finished ACC-683 Topic 3 lot sale character memo example, weighing the dealer factors and section 1237 against five lot sales, reporting capital gain and pricing a bulk sale for the rest. Searches like "acc 683 topic 3 assignment example", "acc683 topic 3 sample" and "acc-683 topic 3 example" land here.
What a finished ACC-683 Topic 3 lot sale character memo looks like
The finished memo sets out the facts each side depends on, amounts illustrative. The couple farmed the land for thirty years, retired, had it platted into 14 lots, graded a gravel access road and listed the lots with a broker, who sold five over two years at $95,000 against a $10,000 basis per lot, $425,000 of gain in all. The ordinary reading draws on the platting, the road and the steady sales, the marks of land held primarily for sale to customers under section 1221(a)(1). The capital reading draws on the decades of holding, the broker doing all the selling and section 1237, which keeps subdivision alone from making an individual a dealer if no substantial improvement was made. The memo reports capital gain, and says what would reverse it.
How an ACC-683 Topic 3 example is structured
The memo is built so that the losing argument is stated as strongly as the winning one. It opens with the question in one sentence and the two returns it could produce, a capital sale reported on Schedule D or a business on Schedule C carrying self-employment tax. The facts follow in date order, since purpose at the time of sale is what courts examine. A factor table comes third, taking frequency of sales, improvements, selling effort, holding purpose and the couple's other activities one row at a time and marking which way each leans. Section 1237 is applied fourth, with the road tested against its improvement condition. The fifth section states the position and answers the ordinary-income reading directly. The planning section compares selling the nine lots one at a time with a $760,000 bulk offer from an unrelated builder.
Purpose tested at the time of sale
Courts ask why the land was held when each lot sold, so the memo dates the platting and the road instead of resting on thirty years of farming.
The ordinary-income case at full strength
Platting, a graded road and five sales in two years are set out without softening, since a reviewer will test the position against exactly these facts.
The capital-gain case weighed, not counted
Decades of holding, no advertising by the couple and a broker who handled every sale support investment purpose, and the memo explains which of these carries most weight.
The road against section 1237
The provision protects an individual subdividing long-held land only where no substantial improvement was made, so the gravel road's cost and its effect on value decide its reach.
Nine lots planned around a sixth sale
From the year a sixth lot sells, section 1237 turns part of each sale price into ordinary income, which makes the builder's bulk offer worth pricing now.
Where marks go in ACC-683 Topic 3
Deciding the character from one fact sinks more of these memos than anything else, whether that fact is thirty years of farming or the platting map. Papers reporting capital gain without ever stating the ordinary-income case have asserted a position rather than defended it. The reverse error treats any subdivision as a business and adds self-employment tax to $425,000 without testing section 1237. Applying that provision without asking whether the road was a substantial improvement assumes the one condition the facts leave open. Memos that settle the five sold lots and say nothing of the nine still listed produce a correct return and no advice, the gap a capstone is designed to expose. The planning section costs marks too when it recommends the bulk sale without setting its price against the after-tax result of selling lot by lot.
Get an ACC-683 Topic 3 example written to your instructions
Send your ACC-683 Topic 3 instructions, the rubric and the transaction facts your section provided. We write a custom example to them, with both treatments argued at full strength, the governing factors and provisions applied, a filing position chosen and the client's next transactions planned around it, back in 24 to 48 hours. The first one is free, as coursework, not tax advice.
ACC-683 Topic 3 questions, answered
What does 'primarily for sale' mean?
In Malat v. Riddell the Supreme Court read 'primarily' in this setting as meaning of first importance, or principally, so land held for investment is not ordinary property merely because a sale was one possible purpose. Lower courts then apply factors such as the frequency of sales, improvements and selling effort. No single factor decides the question, which is why the memo weighs them against each other.
Does section 1237 settle the question?
Only where its conditions are met. It applies to an individual who has not otherwise held the tract for sale, has held it long enough, and made no substantial improvement that substantially increased its value. If those hold, subdividing the tract and activity incident to selling it do not by themselves make the owner a dealer. The road is the open condition here, so the memo addresses it directly.
Why does the position on five lots affect the other nine?
Because each further sale adds to the frequency and continuity that point toward a business, and from the year a sixth lot sells section 1237 itself makes part of each price ordinary income. The return position and the plan for the remaining land are therefore one decision, taken together. The couple and their figures are composites; this is coursework, never tax advice.