1.Holding: What AB is doing is reading §1221 as assets not in the ordinary course of business, the court says that they don’t see that in the statute (rule is business or not business). 2.Rule: A taxpayer’s motivations in purchasing an asset is irrelevant to the question of whether the asset is “property held by a taxpayer” and is, thus, within §1221’s general definition of a capital asset. Corn Products is not about a narrow reading of property, it is about a broad reading of inventory. Stock is not inventory. a.Government winsd.Playing with Definitions: The Sport of Taxi.Hort—Petitioner acquired the property from his dad who died. The floor was already sublet, agreed to cancel the lease in exchange for a lump payment.1.Issue: Is it a capital gain or ordinary income?2.The Doctrine of Anticipated Ordinary Income: When you roll up ordinary income and try to sell it as capital property, you should anticipate that you will be taxed at ordinary income rates.3.Holding: Petitioner contends that the lease was capital and therefore subject to capital gains. Thecourt disagrees and says that income from the lease is ordinary income and anticipatory income is still income. The lease is the fruit, not the tree, and thus it is not property. 4.McCaffery: This is bad finance: According to this rationale, the government could argue that theabsolute sale of the building should also be ordinary income b/c you are still rolling up your ordinary income stream. ii.McAllister(See above; this case is overruled)1.§1001(e)(1): Overrules the general principle 2.§1001(e)(3): Upholds the specific principle (when the income beneficiary sells her entire interest to the remainder beneficiary)iii.PG Lake—Oil corporation collecting royalties. The oil they collect, and sell, is ordinary income (inventory). There is a loan made to their CEO and in order to discharge the loan, they assign the oil rights to cancel the debt. 1.Arguments:a.Taxpayer: The company is saying that this is a capital gain b/c it is property.b.Government: It is ordinary income2.Holding: It is a substitute for ordinary income, so it is ordinary income. a.It looks like bullshit, it is bullshit, you don’t have the capital gains rate.iv.Clay Brown—Company with lumber, guy wants to retire and the kids take over. They got $1M of assets of lumber. If they were to sell that lumber, they would get ordinary income (§1221(1)—inventory). What they do is sell the stock in ClayBrown (sale). The cancer institute then leases all of the business to Fortunainc. (his lawyers) (lease—ordinary income). Fortuna sells off the lumber—the rent is 80% of the sales price and keep 20% as atty fees. Then cancer inst. pays 90% of the 80% to CB for the sale. SO CB is left with $720K at capital gain rates, the charity is left with $80K and the lawyers get $200K. Had they just sold the lumber, they would pay 70% ordinary income rate taxes on the $1M. Overall they got keep $500Krather than $300K.