>You are correct, I was sloppy. The treasury regulations<
are themselves sloppy. Notice that the previous epochs of
tenure are explicitly "included" in the aggregate ex post,
but no mention is made of the intervening epochs wherein
one was not actually exposed to the investment risk attending
the property. The IRS has had many opportunities to make
a case and go before the magistrate and put paid to this
notably obscure precinct of taxland. They demit every time.
They actually like a certain amount of logical fog
because it adds to their power. Now, grey areas are played
for fun and profit by taxpayers too--what's happening here
(this of course is important only because we treat short- and
long-term capital gain differently) is they think leaving the
matter unclear and undecided helps them more than the enemy.
That's why I footed my note with the SCOTUS reference. On
logic, if you include the flat epochs you could claim long-
term treatment even though you were actually exposed to the
investment risk for a couple of weeks, which raises the form
vs substance issue. Tax is a mighty weird domain--Einstein
remarked that the most mysterious force in the universe was
the federal income tax.
I once chatted up a staffer in the IRS research department
about this and he said that his younger collegues argue about
it while their elders roll their eyes.
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