Estate of John F. Nutt, Deceased, and v. Commissioner of Internal Revenue, and Eileen M. Nutt, and v. Commissioner of Internal Revenue, And

The decision of the tax court is reversed and a decision should be entered for petitioners.

This case has been here before. See Nutt v. C.I.R., 351 F.2d 452 (9th Cir. 1965) and Nutt v. C.I.R., published as an Appendix hereto.

This opinion assumes familiarity with both decisions.

On the second remand the tax court found 75 shares of stock of Rancho Tier-ra Prieta in the name of John Nutt and 75 shares in the name of Eileen Nutt (constituting control of Tierra Prieta) were all community property. Thus it was held that John Nutt, the husband and, therefore, the manager of the community, had the indirect right to reacquire the land they had sold to Tierra Prieta. As a result of the indirect right to reacquire, the tax court ruled that capital gains treatment on the sale was not available to the Nutts.

Section 1231(b) (4) provides, as it did then, for capital gains treatment on the sale of unharvested crops on land used in the taxpayer’s trade or business and held for more than six months, if the crop and land are sold at the same time to the same person. Treas. Reg. § 1-1231-1 (f) says that Section 1231(b) (4) does not apply to a sale if the taxpayer retains any right or option to…