Biedenharn Realty Co. v. United States

Biedenharn Realty (plaintiff), formed to manage family investments including farmland, acquired a 973-acre property purely as a farming investment and initially just farmed and leased it out. After interested buyers approached the company, Biedenharn subdivided the land into lots, added streets, water, sewer, and electricity, hired brokers to sell the lots, and continued farming other parts of the land throughout the selling process. Biedenharn reported 60% of its gains as ordinary income and 40% as capital gains; the tax commissioner determined all of it should be ordinary income, and the district court sided with Biedenharn on a refund suit. The government appealed.