US SUPREME COURT DECISIONS

Upon the sale of real estate which had been acquired by a joint venture in which petitioners participated, petitioners reported the profits therefrom as capital gains. Respondent argued that the venture had a dual purpose -- to develop the property for rental or to sell it -- and that the profit was taxable as ordinary income. The District Court ruled that petitioners failed to establish that the property was not held primarily for sale to customers in the ordinary course of business, and that the profits were not capital gains under 26 U.S.C. § 1221(1). The Court of Appeals affirmed. Respondent urges the construction of "primarily" as meaning that a purpose may be "primary" if it is a "substantial" one.

Held: The word "primarily," as used in §1221(1), means "of first importance," or "principally."

347 F.2d 23, vacated and remanded.