WATSON V. COMMISSIONER, 345 U. S. 544 (1953)

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U.S. Supreme Court

Watson v. Commissioner, 345 U.S. 544 (1953)

Watson v. Commissioner

No. 290

Argued February 2, 1953

Decided May 18, 1953

345 U.S. 544


For several years, a taxpayer held an undivided interest in an orange grove and engaged in the business of growing and selling the oranges it produced. In the midst of the 1944 growing season, she sold her interest in the grove, including an unmatured crop then on the trees.

Held: for federal income tax purposes, under § 117(j) of the Internal Revenue Code, as in effect in 1944, she must treat that part of her profit from the sale which is attributable to the unmatured crop as ordinary income -- not as a capital gain. Pp. 345 U. S. 545-553.

(a) It is immaterial that, under the law of the state where the land is situated, an unmatured, unharvested crop is treated as real property for many purposes. P. 345 U. S. 551.

(b) In the circumstances of this case, the proceeds of the sale fairly attributable to the crop were derived from property "held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business" within the meaning of § 117(j) as it existed in 1944. Pp. 345 U. S. 551-552.

197 F.2d 56 affirmed.

The Tax Court sustained a deficiency assessed by the Commissioner of Internal Revenue against petitioners, but reduced the amount. 15 T.C. 800. The Court of Appeals affirmed. 197 F.2d 56. This Court granted certiorari. 344 U.S. 895. Affirmed, p. 345 U. S. 553. chanrobles.com-red

Page 345 U. S. 545