In 1942, S.O. Bynum and his wife (plaintiffs) purchased a farm and operated it as a commercial nursery. By 1959, the farm was heavily mortgaged, and the nursery was beginning to incur losses. The Bynums decided to subdivide a portion of the farm into housing lots. The Bynums agreed to pay their lender a percentage of each lot’s sale, and needed only 26 sales to pay off the mortgage in full. The Bynums continued to spend most of their time operating the nursery business, but they also invested substantial sums to improve and advertise 38 housing lots for sale. The Bynums’ advertising promised that they eventually planned to sell 233 lots. In 1960 and 1961, the Bynums made large gains from selling the first 20 lots. The commissioner of internal revenue (commissioner) (defendant) denied the Bynum’s attempt to have these gains taxed as capital gains and not as ordinary income on their 1960 and 1961 federal taxes. The Bynums filed a petition challenging the commissioner’s decision.