FACTS: Petitioner was a member of a joint venture that bought a parcel of real estate to develop and operate an apartment complex. Because of financial difficulties, some of the lots were sold, and the profits were taxed as ordinary income. Additional difficulties caused petitioner to sell his interest in the remaining lots. The district court held that the joint venturers intended either to sell the property or to develop it for rental, thus petitioner failed to prove that the property was not primarily for sale to customers in the ordinary course of business and, therefore, the profits from petitioner's sale of his interest in the remaining lots were to be taxed as ordinary income, not as capital gains. On certiorari, the United States Supreme Court held that the ordinary meaning of the word "primarily" in 26 U.S.C.S. § 1221(1) meant "of first importance." The Court held that the district court used the wrong standard to determine if the lots were primarily for use in the ordinary course of business or were simply held for a period of time while their value appreciated. The Court, therefore, vacated the judgment and remanded the case.
CONCLUSION: The Court vacated the judgment and remanded the case to the district court for fresh fact-findings addressed to the statute as construed in the opinion.
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