Robert W. Pointer and Maybelle Pointer v. Commissioner of Internal Revenue

This proceeding was instituted to review a decision of the Tax Court holding that gains from the sale of subdivided lots of a tract of land constituted ordinary income to the petitioners rather than long-term capital gains. The Tax Court upheld the deficiency assessments by the Commissioner of Internal Revenue against the petitioners for the taxable years of 1961, 1962, and 1963. The deficiencies assessed resulted entirely from the disallowance by the Commissioner of capital gain treatment claimed by the petitioners on the sale of the subdivided lots.

The material facts are not controverted. In 1953 and 1954, the petitioners, husband and wife, purchased two contiguous tracts of land near their home, hereafter collectively called “the tract”. At the time of purchase, the land contained a stand of timber as well as various crops of nuts and berries. Substantial portions of the surrounding area had been subdivided and developed as single-unit residence property, while other portions were vacant. In 1957, pursuant to an interim zoning code, the tract was zoned residential and remained so zoned after final zoning in 1959. tract was subdivided and platted April, 1959, and the plat was…