Alice E. Cohn, Marion A. Cohn, Daniel E. Cohn, and Edgar M. Cohn v. Commissioner of Internal Revenue

This is a review of a decision of the Tax Court, 21 T.C. 90 , which sustained the finding of the Commissioner of Internal Revenue that the sale of 69 multiple unit houses by petitioners in 1945 did not constitute a sale of capital assets within the meaning of Section 117(a) (1) and (j)(l) of the Internal Revenue Code, 26 U.S.C.A. § 117 (a)(1) and (j) (1) and therefore the gain realized therefrom constituted ordinary income rather than long-term capital gain.

Section 117(a)(1) provides for long-term capital gains treatment for recognized gains upon sale or exchange of property used in trade or business. Section 117(;j) (1) defines property used in trade or business for the purposes of that subsection as real property used in trade or business, held for six months which is not held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.

The petitioners, Daniel and Edgar Cohn, are partners in the Security Construction Company which was organized in May of 1942 and built houses for sale before wartime controls of private housing went into effect in February 1943. The Company received priorities to build multiple unit houses which it intended…