Watson

This case is here on a petition to review a decision of the Tax Court, 15 T.C. 800 , that the Commissioner of Internal Revenue was correct in assessing a deficiency against the taxpayer, Watson, in respect of personal income taxes for the year 1944. The issue for our determination is to what extent the profit from a sale of an orange grove, consisting of land, trees and an un-matured crop of oranges, should be apportioned between ordinary income and capital gain. The Commissioner concedes that the profit attributable to the land and trees is capital gain, but contends that the profit attributable to the unmatured crop of oranges should be allocated to ordinary income. The taxpayer contends that she is entitled to the favorable capital gains treatment for her profit from the unmatured oranges under 26 U.S.C. § 117 (j).

In 1944, the taxpayer owned a one-third, interest in an orange grove near Exeter, Tulare County. The property had been operated from January 1, 1942, under a partnership agreement with her two brothers who also owned one-third interests. About May or June of 1944, these owners listed their orange grove for sale with a local real estate agent; and the price…