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Biedenharn Realty Co., Inc. v. United States

United States Court of Appeals for the Fifth Circuit
526 F.2d 409 (1976)


Facts

Biedenharn Realty Co., Inc. (Biedenharn) (plaintiff) listed $254,409.47 in real estate profits on its federal tax returns for 1964, 1965, and 1966. Biedenharn listed 60 percent of the gain as ordinary income and 40 percent as capital gains. The United States Internal Revenue Service (IRS) (defendant) later determined that Biedenharn’s profits were entirely ordinary income and thus assessed additional taxes and interest. Biedenharn sued the IRS for a refund of $32,006.86, claiming that the entire profit represented capital gains. The district court agreed with Biedenharn’s characterization. The IRS appealed, arguing that Biedenharn has become a business that holds property to sell to customers in the ordinary course of its trade, and Biedenharn must therefore treat any gains as ordinary income.

Rule of Law

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Issue

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Holding and Reasoning (Goldberg, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
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Dissent (Gee, J.)

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