TAXATION-FEDERAL INCOME TAX-SALE OF UNMATURED CROP AS CAPITAL GAIN OR ORDINARY INCOME

Petitioner sold a farm owned over six months upon which was a growing but unmatured wheat crop. When taxed upon the amount of sale price apportionable to the crop as ordinary income, he contended that under state law the land was a capital asset and that the growing crop was an inseparable part thereof. He concluded, therefore, that the entire amount should have been taxed as a capital gain. The purchaser testified that he had considered the crop to be worth about $8,500 and that he had deducted this amount in his own tax return as cost of the crop.

The commissioner held that a growing crop is not necessarily a capital asset and that the part of the payment apportionable to the crop was ordinary income. On appeal to the Tax Court of the United States, held, affirmed. The amount of gain from the sale of the growing crop was properly treated as ordinary income, not capital gain, since the crop was property held primarily for sale to customers. McCoy v. Commissioner, 15 T.C. 828 (1950).