John W. Kelley and Bette C. Kelley v. Commissioner of Internal Revenue

Once again we are asked to determine whether, under certain given circumstances, sales of real estate by a taxpayer have resulted in the realization of ordinary income or of capital gains. See e. g., Pool v. Commissioner, 9 Cir., 1957, 251 F.2d 233 , certiorari denied 1958, 356 U.S. 938 , 78 S.Ct. 780 , 2 L.Ed.2d 813 ; Achong v. Commissioner, 9 Cir., 1957, 246 F.2d 445 ; Palos Verdes Corp. v. United States, 9 Cir., 1952, 201 F.2d 256 . This time the facts of the matter are as follows:

Taxpayers, man and wife, moved from Texas to the suburbs of Las Vegas, Nevada, in 1947. They purchased 160 acres of land in Paradise Valley, six miles from Las Vegas, with the intention of using the realty for ranching purposes. They built a home on the land. Money troubles befell the taxpayers late in 1948, at which time they sought sources of income apart from their ranching activities. They operated an ice skating concession without success until April, 1949. To meet their financial obligations they sold during 1949 close to 90 acres of their land in Paradise Valley. These sales were accorded capital gains treatment both by taxpayers and the Commissioner. From 1949 through the beginning of 1951,…