MALAT V. RIDDELL
383 U.S. 569 (1966)
NATURE OF THE CASE: This was a dispute over the characterization of income.
FACTS: Malat (P) participated in a joint venture and acquired a 45-acre parcel of land.
The venture intended to develop and operate an apartment project on the land. There were
difficulties encountered such as finding adequate financing. This resulted in a change of
plans and the interior lots were subdivided and sold. The profit from those sales were
reported and taxed as ordinary income. The joint venture continued to look for alternatives
to the original plans. Additional zoning frustrations were encountered and eventually P and
the others involved decided it was time to give up. They then sold their remaining interests
in the land. P reported the income from that sale as a capital gain and the IRS was not
impressed; they ruled it ordinary income. Every court along the way agreed with the IRS. The
Supreme Court granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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