Malat v. Riddell
| Citation | 86 S.Ct. 1030,383 U.S. 569,16 L.Ed.2d 102 |
| Decision Date | 21 March 1966 |
| Docket Number | No. 487,487 |
| Parties | William MALAT et ux., Petitioners, v. Robert A. RIDDELL, District Director of Internal Revenue |
| Court | United States Supreme Court |
George T. Altman, Beverly Hills, Cal., for petitioners.
Jack S. Levin, Washington, D.C., for respondent.
Petitioner1 was a participant in a joint venture which acquired a 45-acre parcel of land, the intended use for which is somewhat in dispute. Petitioner contends that the venturers' intention was to develop and operate an apartment project on the land; the respondent's posi- tion is that there was a 'dual purpose' of developing the property for rental purposes or selling, whichever proved to be the more profitable. In any event, difficulties in obtaining the necessary financing were encountered, and the interior lots of the tract were subdivided and sold. The profit from those sales was reported and taxed as ordinary income.
The joint venturers continued to explore the possibility of commercially developing the remaining exterior parcels. Additional frustrations in the form of zoning restrictions were encountered. These difficulties persuaded petitioner and another of the joint venturers of the desirability of terminating the venture; accordingly, they sold out their interests in the remaining property. Petitioner contends that he is entitled to treat the profits from this last sale as capital gains; the respondent takes the position that this was 'property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business,'2 and thus subject to taxation as ordinary income.
The District Court made the following finding:
The District Court ruled that petitioner had failed to establish that the property was not held primarily for sale to customers in the ordinary course of business, and thus rejected petitioner's claim to capital gain treatment for the profits derived from the property's resale. The Court of Appeals affirmed, 9 Cir., 347 F.2d 23. We granted certiorari (382 U.S. 900, 86 S.Ct. 244, 15 L.Ed.2d 154) to resolve a conflict among the courts of appeals3 with regard to the meaning of the term 'primarily' as it is used in § 1221(1) of the Internal Revenue Code of 1954.
The statute denies capital gain treat ment to profits reaped from the sale of 'property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.' (Emphasis added.) The respondent urges upon us a construction of 'primarily' as meaning that a purpose may be 'primary' if it is a 'substantial' one.
As we have often said, 'the words of statutes—including revenue acts—should be interpreted where possible in their ordinary, everyday senses.' Crane v. Commissioner of Internal Revenue, 331 U.S. 1, 6, 67 S.Ct. 1047, 1051, 91 L.Ed. 1301. And see Hanover Bank v. Commissioner of Internal Revenue, 369 U.S. 672, 687—688, 82 S.Ct. 1080, 1088—1089, 8 L.Ed.2d 187; Commissioner of Internal Revenue v. Korell, 339 U.S. 619, 627—628, 70 S.Ct. 905, 909, 94 L.Ed. 1108. Departure from a literal reading of statutory language may, on occasion, be indicated by relevant internal evidence of the statute itself and necessary in order to effect the legislative purpose. See, e.g., Board of Governors of Federal Reserve System v. Agnew, 329 U.S. 441, 446—448, 67 S.Ct. 411, 413—415, 91 L.Ed. 408. But this is not such an occasion. The purpose of the statutory provision with which we deal is to differentiate between the 'profits and losses arising from the everyday operation...
To continue reading
Request your trial
-
State v. Strong Oil Co., Inc.
...by relevant internal evidence of the statute itself and necessary in order to effect the legislative purpose." (Malat v. Riddell, 383 U.S. 569, 86 S.Ct. 1030, 16 L.Ed.2d 102.) However, this general rule has been modified when the statute regulates commercial activity. In that case, "the sta......
-
United States v. Crosson
...459, 88 S.Ct. 1140, 20 L.Ed.2d 40 (1968); rehearing denied 391 U.S. 929, 88 S.Ct. 1800, 20 L.Ed.2d 671 (1968); Malat v. Riddel, 383 U.S. 569, 86 S.Ct. 1030, 16 L.Ed.2d 102 (1966). Turning to Webster's New International Dictionary, 3d Edition, we find the common definition of the word "conte......
-
Diaz v. INS, Civ. S-83-436 LKK.
...Id. at 1403-04. The words used in the regulation are to be given their plain and ordinary meaning, Malat v. Riddell, 383 U.S. 569, 571, 86 S.Ct. 1030, 1032, 16 L.Ed.2d 102 (1966), and if possible all ambiguities are to be resolved in favor of an interpretation consistent with the statutory ......
-
Parkside, Inc. v. C. I. R.
...to the restraint of the "clearly erroneous" rule. See Fed.R.Civ.P. 52(a); Int.Rev.Code of 1954, § 7482(a); Malat v. Riddell, 383 U.S. 569, 572, 86 S.Ct. 1030, 16 L.Ed.2d 102 (1966); Rockwell v. Commissioner,512 F.2d 882, 884 (9th Cir.), cert. denied, 423 U.S. 1015, 96 S.Ct. 448, 46 L.Ed.2d ......
-
Tax Court In Brief | Musselwhite v. Commissioner | Loss In Sale Of Real Estate: Ordinary Loss Or Capital Loss?
...the operation of a business and (2) the realization of appreciation in value accrued over a substantial period of time. Malat v. Riddell, 383 U.S. 569, 572 (1966). The "primarily" as used in section 1221(a)(1) means "of first importance" or "principally." Whether property is property descri......
-
Table of cases
...2007), §33:4 Mainstream Loudoun v. Board of Trustees of Library , 24 F. Supp. 2d 552 (E.D. Va. 1998), §20:4.H.2 Malat v. Riddell , 383 U.S. 569 (1966), §9:3.D.2.a Maldonado v. City of Altus , 433 F.3d 1294 (10th Cir. 2006), §24:4 Maldonado v. Frio County , 2004 U.S. Dist. LEXIS 10723 (W.D. ......
-
Table of cases
...2007), §33:4 Mainstream Loudoun v. Board of Trustees of Library , 24 F. Supp. 2d 552 (E.D. Va. 1998), §20:4.H.2 Malat v. Riddell , 383 U.S. 569 (1966), §9:3.D.2.a Maldonado v. City of Altus , 433 F.3d 1294 (10th Cir. 2006), §24:4 Maldonado v. Frio County , 2004 U.S. Dist. LEXIS 10723 (W.D. ......
-
Quantitative Model for Measuring Line-Drawing Inequity
...whether the type of situations discussed in this Article would make the property a capital asset or inventory. 21. See Malat v. Riddell, 383 U.S. 569, 572 (1966) (“The purpose . . . is to differentiate between the profits and losses arising from the everyday operation of a business on the o......
-
Practical advice on current issues.
...hand ... and the 'realization of appreciation in value accrued over a substantial period of time' on the other hand" (Ma/at v. Riddell, 383 U.S. 569, 572 Facts of the case Because the case involves whether the taxpayer was a real estate dealer or merely an investor, it is necessary to discu......