Mauldin v. Commissioner

C.E. Mauldin (petitioner) originally bought New Mexico land for cattle feeding, but abandoned that plan before even acquiring it in 1921; after failing to sell the whole tract in 1924, he subdivided it into lots and actively marketed and sold a substantial number through real estate agents and advertising in 1939-1940, then decided to hold the remaining land for investment as he entered the lumber business in 1940 and stopped actively advertising. Despite that, Mauldin continued regularly selling lots from 1940 to 1945, selling a substantial portion in 1945 alone and deriving significant income from the sales, leaving only 20 acres by 1945; he reported his 1944-1945 lot sales as long-term capital gains, but the Commissioner (respondent) recharacterized the gains as ordinary income, and the Tax Court sustained that ruling.