Williams v. McGowan

Williams (plaintiff) and Reynolds ran a hardware business, Williams holding two-thirds and Reynolds one-third, with cross-purchase rights on withdrawal. After Reynolds died in 1940, Williams bought his interest from the estate for about $12,188, becoming sole owner, then sold the whole business later that year. The business's assets included cash, receivables, fixtures, and merchandise inventory. Williams reported a loss on his original interest and a small gain on the acquired interest as ordinary income; the Commissioner disallowed that treatment. Williams paid the tax and sued for a refund, and the trial court dismissed his complaint.

Whether the sale of a business as a whole constitutes the disposition of a single capital asset.