Mauldin Brief - Income 3 Extra Credit.docx - Mauldin v...

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Mauldin v. Commissioner , 195 F.2d 714. (1952 US Appeals). ISSUE(S): Is the property held by the taxpayer primarily for sale in the normal course of purpose and thus should be taxed ordinarily, or was the property sold as an investment and is subject to a capital gain tax? FACTS: In 1920 C.E. Mauldin purchased 160 acres of land for cattle farming. With the failure of the business, the land was subdivided to facilitate the sale into the residential market. In 1939 the city of Clovis, NM assed tax liens on the properties forcing the taxpayer to “actively sell” the properties in 1939 and 1940 to settle the debt with the city. Once the debt was paid, the taxpayer stopped actively selling the properties but continued to sell lots from 1941 to 1945. The Commissioner claimed that the taxpayer had a deficiency for taxes owed in 1944 and 1945 since land sold in those years should be treated as ordinary income instead of capital gains. RULE(S): The court relied on exclusionary clause of Section 117(a)(1) of the Internal Revenue Code to

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