Court Opinion

ID: 4614353
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:30:01.322301+00
Date Added: 2024-06-11T07:54:45.916426
License: Public Domain

FLORENCE H. EHRMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  CLARA HELLMAN HELLER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  I. W. HELLMAN, JR., DECEASED, FRANCES J. HELLMAN AND WELLS FARGO BANK & UNION TRUST CO., TRUSTEES UNDER THE LAST WILL AND TESTAMENT, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Ehrman v. CommissionerDocket Nos. 92448, 92449, 92450.United States Board of Tax Appeals41 B.T.A. 652; 1940 BTA LEXIS 1157; March 22, 1940, Promulgated *1157  Petitioners held land for investment and sale.  A tract was sold to a corporation which subdivided it and caused various improvement assessments to encumber it.  Many lots were sold and others contracted for sale.  The corporation defaulted and by foreclosure petitioners reacquired the property and continued the work of subdivision, through agents, with other tracts added later.  This was the only practical way of disposing of the property.  Held, the property was held primarily for sale to customers in the ordinary course of petitioners' trade or business.  Sec. 117(b), Revenue Act of 1934.  Commissioner v. Boeing, 106 Fed.(2d) 305; Richards v. Commissioner, 81 Fed.(2d) 369. Sidney M. Ehrman, Esq., and Lloyd W. Dinkelspiel, Esq., for the petitioners.  Harry R. Horrow, Esq., and H. G. Potthoff, Esq., for the respondent.  DISNEY*652  The proceedings here to be considered involve deficiencies in income taxes, for the year 1935, as follows: Docket No. 92448$10,677.64Docket No. 924496,799.88Docket No. 924509,180.82The only question left for examination is whether gains*1158  realized upon the sales of certain lots in a subdivision are taxable as ordinary gains, or as capital gains.  From evidence and stipulations we make the following findings of fact.  *653  FINDINGS OF FACT.  1.  Florence H. Ehrman and Clara Hellman Heller during the taxable year were housewives, resident in San Francisco, California, and the address of the petitioner, the testamentary trust under the will of I. W. Hellman, Jr., is also San Francisco.  The income tax returns of all petitioners were filed with the collector for the first district of California.  Florence H. Ehrman, Clara Hellman Heller, and I. W. Hellman, Jr., were children of I. W. Hellman, who died in 1920.  I. W. Hellman, Jr., died testate, leaving as beneficiaries of trusts set up by him his four children, I. W. Hellman, Frederick J. Hellman, bankers, Marco F. Hellman, invesment banker, and Florence H. Dinkelspiel, a housewife.  All reside in San Francisco except Marco F. Hellman, who resides and has his business in New York.  Edward H. Heller, a son of Clara Hellman Heller, has his place of business in San Francisco and resides in a suburb thereof.  2.  I. W. Hellman was a banker, the president of the*1159  Wells Fargo Nevada National Bank and the Union Trust Co., both of San Francisco, and the Farmers & Merchants National Bank of Los Angeles, and was active also in the management of a bank in Portland.  At his death he left an estate of about $9,500,000, consisting of personal property, such as stocks and bonds, in substantial amounts, and a large number of tracts of land both improved and unimproved, including 9 or 10 improved tracts in Los Angeles, upon one of which was a large office building.  The estate also included ranch properties known as follows: the Whittier Ranch, the Los Alamitos, about 6,000 acres, San Pedro, about 800 acres, Cucamonga, 300-400 acres, El Nacimiento cattle ranch, about 37,000 acres (owned through a corporation), and Repetto Ranch, of 1,569.93 acres (hereinafter sometimes called Repetto), about five miles east of the city hall of Los Angeles, but outside the city limits.  Repetto includes the property involved in these proceedings.  3.  These ranch properties had been acquired by I. W. Hellman, Sr., at least thirty years prior to his death, and the Repetto Ranch between 1870 and 1880.  It was used first for grazing and later, down to 1929, for farming and*1160  horticulture.  It is about one-half level and one-half hilly.  The only improvements have been placed on a comparatively small portion of the level land.  A part lies in the City of Montebello; a part in the City of Monterey Park.  4.  Upon the death of I. W. Hellman, Sr., the residue of his estate, including the Repetto Ranch, passed in equal parts to I. W. Hellman, Jr., Clara Hellman Heller, and Florence H. Ehrman; and upon the death of I. W. Hellman, Jr., about one month later, leaving an estate of about $1,500,000, his interest in the Repetto Ranch passed to the petitioners Frances J. Hellman and Wells Fargo Bank & *654 Union Trust Co., as trustees under his testamentary trust.  About 1926 Clara Hellman Heller transferred to her son Edward H. Heller a one-twelfth interest in the Repetto Ranch.  5.  In order to pay inheritance taxes, the executor of the estate of I. W. Hellman, Sr., sold certain property in Los Angeles and the Cucamonga Ranch.  It was difficult to find purchasers.  No other real estate has been sold by the heirs to whom the property, including the ranches, was distributed, except the sales which have been made from Repetto.  Prior to 1929 the only sales*1161  from Repetto were five acres to an electric company and about 3 1/2 acres to a school.  No particular effort was made to sell Repetto down to 1929.  There was not a good market.  Offers were received by Henry W. Keller, whom the heirs had employed to look after their properties in the vicinity of Los Angeles, but no offer was made for the whole ranch, and the offers involved real estate subdivision schemes, involving payment from the proceeds thereof.  The prices offered and the proposals were unsatisfactory, and were refused by the heirs, who were opposed to a subdivision project and wished to sell outright, either for cash or substantial cash and security for the balance.  6.  In 1929 about 800 acres of the Repetto Ranch were sold to the Ransom Corporation.  The total consideration was $4,052,000, with a down payment of $250,000 cash (less a commission), with $2,431,200 payable October 1, 1937, and the remainder by October 1, 1939.  Interest was to begin to run at 6 percent on October 1, 1934, upon $3,802,000 or the unpaid balance thereof.  Title was conveyed to the Farmers & Merchants National Bank of Los Angeles as trustee and "Repetto Land Trust No. 813" was set up by the bank*1162  on May 29, 1929.  The trustee was authorized to issue land trust certificates of not more than $1,700,000, the proceeds thereof to be applied first to pay the $250,000 upon the purchase price of the property, 75 percent of the remainder to be distributed to an improvement and expense account to the extent of $450,000, and the remaining 25 percent to be distributed to the advertising fund to the extent of $150,000, and any balance up to $140,000 to be distributed to the building fund.  The trustee was authorized also to sell, lease or mortgage the property or create a bonded indebtedness thereon such as the trustee and the beneficiary, that is, the purchaser, should deem advisable or for the best interest of the trust; also to improve the property as deemed advisable by the trustee and the purchaser, to subdivide the property into such tracts, lots, and parcels as the trustee, purchaser, and the sellers might determine, to dedicate and grant to public use roads, streets, and alleys shown on the map of the property, and to convey easements and rights of way desirable for transmission of water, gas, and electricity.  The trustee was also authorized to purchase or otherwise *655 *1163  acquire any real property adjoining, contiguous to, or abutting upon the real property described in the trust instrument so far as necessary in order to give proper depth, size, and shape to lots in the subdivision.  A schedule of minimum prices for lots was to be prepared and agreed upon by the trustee, the sellers, and the buyer sufficient to produce to the sellers the release price, upon payment of which the sellers would execute deeds.  The terms of the sale might be reduced upon order of the sellers and the buyer and restrictions, reservations, and conditions to be contained in deeds and contracts were to be such as agreed upon by trustee, buyer, and seller.  The trustee alone should collect, receive, and receipt for all moneys paid on sales, the proceeds of which were to be applied to commissions and to three accounts called improvement and expense account, release account, and sinking fund.  The sellers were to be paid from the release account.  7.  The Ransom Corporation proceeded to develop a portion of the land sold, but in 1931 and 1932 became involved in difficulties and advised Keller, who was looking after the matter for the Hellman heirs, that they could not carry out*1164  the entire transaction.  After negotiations the parties entered into a modification of the declaration of trust under date of May 16, 1932.  Thereby all of the land except 273.46 acres was released from the declaration of trust and the total purchase price was reduced to $1,299,978.25.  Thereafter the Ransom Corporation continued its efforts, but in a short time defaulted under the amended agreement and on December 2, 1932, notified the trustee and Keller that they could not further proceed.  Thereafter the Hellman heirs on July 31, 1933, demanded sale and on February 13, 1934, purchased the property themselves at a trustee's sale for approximately $170,000.  Deed was delivered on May 30, 1934.  8.  The property so reacquired by the Hellman heirs had been subdivided into lots, of which some had actually been deeded to purchasers and some were under contracts of sale.  These uncompleted contracts were acquired by the Hellman heirs.  The Ransom Corporation was under obligation to the purchasers of lots to install improvements, such as the laying of streets and sidewalks, installation of public utilities such as light, water, and power, and landscaping the property, and to these obligations*1165  the property was subject when reacquired by the Hellman heirs.  In addition the Hellman heirs had guaranteed the obligations of the Ransom Corporation for about $80,000 because of taxes against the property.  An indebtedness of about $155,000 that had been incurred as to one boulevard running through the property and assessment zones under the Mattoon Act had been established against the property, as well as a drainage district, involving assessment liabilities against the property.  *656  9.  The Hellman heirs had requested Keller's advice as to what to do even prior to the trustee's sale and had asked him to study the situation, survey the property, and advise them what to do.  After making an investigation he recommended that they carry on with the subdivision, first reducing the price of the lots to meet the market at that time.  He knew of no other way for the Hellman family to dispose of the property which had been subject to the Ransom Corporation transaction and therefore recommended continuance of the project for the purpose of disposal of the property.  He was told to find an agent whom he could recommend, who would take the place of the Ransom Corporation and continue*1166  the operation.  Such an agency was found in the Hamilton Sales Corporation (hereinafter called Hamilton), with which neither Keller nor any member of the Hellman family was connected.  Hamilton actually started operations in November 1933, prior to the completion of the foreclosure.  10.  The first thing done was to restore to acreage such part of the tract as could be restored.  On certain parts of the land not many lots had been sold or contracted to be sold.  These Keller was engaged to purchase back, and did purchase, or secure by exchange, in some cases at excessive figures.  After this was done two tracts were restored to acreage.  These were at the southeastern end of the property which had been subdivided and were known as tracts 5186 and 10237, comprising in all about 46 acres.  At approximately the same time and on November 9, 1933, a tract map was filed for subdivision purposes as to tract No. 10759, which consisted of 40.16 acres and was located adjoining and to the north of the tract of 273.46 acres retained by the Ransom Corporation under the amended agreement.  The reason for opening the new tract was that it brought the subdivided area more centrally and closer to*1167  the other property that had been divided and nearer to the business section.  This was a part of Keller's recommendation.  Tract 10759 was a part of the undivided acreage returned to the Hellman heirs after the modification of the Ransom contract in 1932.  11.  A contract was made with Hamilton on February 19, 1934, reciting the Hellmans to be owners of the lands described, and providing in general for the development and sale of the subdivided property and in particular that all contracts of sale should be made in the name of, and executed by, the Hellmans or their agent; that the Hellmans or their agent should collect, receive, and receipt for all money, except as otherwise specifically provided, paid on sales of property except the initial deposit paid under any preliminary agreement; that the Hellmans should pay all assessment bonds theretofore issued and unpaid and should maintain at their own expense the property in a clean and orderly condition when offered for sale, *657  properly landscape the property and maintain the landscaping at their own expense, they however to be sole judges as to the adequacy and propriety of the landscaping; that Hamilton should make only*1168  such representations to purchasers with reference to landscaping and maintenance thereof as the Hellman heirs should specify and outline in writing; that Hamilton should be paid as selling commission 28 percent of the gross sale price; that Hamilton at its own expense should organize and train an efficient sales organization to carry on an extensive and intensive advertising and selling campaign; that all advertising should before use be approved by the Hellmans in writing.  Advertising was submitted to Keller when Hamilton first started operations.  Keller paid attention to the advertising which Hamilton issued and the instructions given its agents, for it was desired that no misrepresentations be made.  The contract also provided that the Hellmans should provide a revolving fund to be loaned to purchasers of lots or used in construction of dwellings by the Hellmans on the property for sale, within the discretion of the Hellmans, the terms of loans and type and location of dwellings to be determined by the Hellmans.  (In fact no revolving fund was set up, but the Hellman heirs constructed and paid for five houses, costing about $3,500 or $4,000 each, for the purpose of permitting*1169  the sale of the subdivided property.  This was done shortly after Hamilton took over.) The contract was terminable by Hamilton on 90 days' notice and by the Hellman heirs for failure by Hamilton to sell in any year property of a gross sale price of less than $750,000.  Hamilton was appointed sole agent for the Hellman heirs to handle and sell the property described and such additional property adjoining thereto as the parties might agree upon.  The Farmers & Merchants National Bank was appointed by the Hellman heirs to handle the matter of delivery of contracts and deeds, make collections, keep a record of contracts and collections, pay a 5 percent commission to Keller and itself receive a 2 percent commission for services.  A detailed letter of instruction was given the bank.  The bank kept two trust accounts - one, numbered 813, for the lots sold or contracted by the Ransom Corporation, the other, numbered 1231, for lots sold later.  12.  Tracts additional to those covered by the original agreement with Hamilton were added to the subdivision - on February 9, 1937, 34.8 acres, and April 8, 1938, 64.84 acres.  These two tracts were subdivided by the petitioners.  13.  Since the*1170  default of the Ransom Corporation and sale to petitioners in 1934 they have been improving the subdivided property and paying the cost thereof after approving the same.  They entered into contracts with public utilities for services to the subdivisions.  They made a contract with the Fitzgerald Engineering & Construction *658  Co. for the maintenance of the tract and other work done.  That company made surveys for improvements, which were submitted for approval to the Hellman heirs.  Though the Hellmans paid for no improvements during the life of the Ransom contract, after the foreclosure in 1934 they paid for street improvements, sidewalks, public utilities such as water, electric, and gas facilities and landscaping.  After August 1, 1933, Repetto Trust No. 813 expended on tract maintenance $1,056.24.  Through the Fitzgerald Engineering & Construction Co., from August 1, 1933, to December 31, 1935, there were expended for maintenance and construction of the various subdivided tracts the following amounts: Hellman heirs tract maintenance$10,670.02Engineering4,235.09Street improvements39,932.69Water mains13,350.19Gas mains1,206.17Houses16,807.66Street improvements under obligation of Standard Accident Co. - assumed by Hellman heirs16,928.58*1171  (The above does not include deposits for gas and electric service made direct by I. W. Hellman heirs to public utility corporations.) Thereafter the Hellman heirs expended for improvements and maintenances through the Fitzgerald Construction & Engineering Co. as follows: In 1936, $28,784.42; in 1937, $51,694.17; and in 1938, $76,352.25.  Lot contracts and sales for the years shown were as follows: 193419351936193719381.  Number of contracts, lots1201862642582342.  Total sale price$161,679.87$230,170.00$296,029.00$342,565.00$285,446.433.  Total payments made on contracts59,625.44105,276.70159,379.99230,465.88226,346.6214.  The Farmers & Merchants National Bank kept accounts of receipts and disbursements.  As to trust No. 813 (covering lots sold or contracted by the Ransom Corporation) the receipts were $414,719.35; the disbursements, paid by the Hellman heirs, were $293,696.19, in addition to some other amounts paid because of Ransom obligation, and $256,000 under the California Improvement Bond Act of 1911, the Mattoon Act, and liability under drainage districts.  Under trust account No. 1231 (as to*1172  lots sold after the Ransom default) the bank showed for 1934 receipts of $61,539.17 and disbursements of $87,217.68; and for 1935 receipts of $120,100.15 and disbursements of $128,197.22.  From commencement of Hamilton's operations on November 12, 1933, to February 1, 1939, trust account No. 1231 shows total receipts of $866,953.66 and total disbursements of $989,355.15.  *659  15.  Keller, as agent for the Hellman heirs, handled cancellation of contracts, using his own judgment in the matter.  In peculiar circumstances he consulted the Hellman heirs and followed their instructions.  Neither Keller nor the Hellman heirs had anything to do with getting purchasers for lots.  Keller received reports from Hamilton as to transactions and transmitted them to the Hellman heirs, who signed the contracts of sale and executed deeds themselves at first.  Later the Farmers & Merchants National Bank signed as their agent.  The contracts and deeds signed in blank were sent to the bank for ultimate delivery to purchasers upon payment.  Sale prices were set by the Hellman heirs in conjunction with Hamilton.  All of Keller's actions were subject to the approval of the Hellman heirs, who, after*1173  being advised by him what was to be done, in almost all cases approved what he proposed.  He consulted them almost daily.  Nothing was done without an order direct from the Hellman heirs or their representative in San Francisco.  Keller transmitted reports to the Hellman heirs almost daily, reciting what was transpiring and frequently giving his recommendation.  This was the invariable practice.  He secured the approval of the Hellman heirs before contracts were let or work undertaken.  The final decisions were made by the Hellman heirs.  Keller received a commission of 5 percent on gross sales and a salary of $500 per month.  He followed the prevailing practice in Los Angeles in handling subdivided tracts.  Keller's opinion was that they did better than other subdivisions in that class.  There were other subdivisions adjacent to Repetto, on the east and south.  The persons conducting such subdivisions were not approached for the purpose of selling the Repetto property.  On the contrary, the approaches came from the other side.  Offers of purchase on the property were not solicited.  No particular effort was made to sell the whole or any part of the property as acreage, though offers*1174  were made to buy Repetto.  The subdivision was a good one and people came wishing to buy.  16.  Hamilton continued sales activities though 1934 and 1935 and thereafter to dispose of the subdivided lots, having as many as 200 salesmen working upon sales.  17.  The purpose of the Hellman heirs in improving the property and opening tract No. 10759 was to dispose of the property returned from the Ransom Corporation.  The two tracts were opened in 1937 and 1938 because the lower priced lots were sold first, leaving restricted high class business property on hand.  They were catering to people of limited income.  In order to sell such lots it was necessary to create population, with a large number of houses, and that was the aim and object of the new subdivision.  It was necessary to keep a large number of lots of various prices on the books.  The high *660  priced restricted business properties are still unsold.  The reason for opening new tracts was the desire to provide lower priced lots which could be sold readily.  If all lots had been low priced probably no further subdividing would have been done.  The price of lots sold through Hamilton was reduced to about half that for*1175  which Ransom was holding them.  The purpose in proceeding with the agreement with Hamilton was to dispose of the property received back from Ransom in a practical way, that is, in the lot parcels into which it had been divided.  18.  None of the petitioners has at any time since 1920 purchased real estate in southern California or any part of California, except home sites for personal use; none has received real estate commissions or brokerages or been a member of real estate banks or had a brokerage license, or made sales of real estate except those involved in these proceedings and the later additions added thereto, excepting only sales of easement or right of way.  Except for the Repetto property, no property has been disposed of for purposes of subdivision.  Keller has on occasions sought, and still seeks, to have the Hellman heirs open additional tracts for the same purpose and their usual response is that they do not want to do so.  19.  It is stipulated and we find that the respondent in arriving at the deficiencies involved erroneously allowed a deduction of $780 for depreciation claimed upon property in Los Angeles at Second and Broadway Avenue, and the taxable income*1176  in each proceeding should be increased by $780, under claim therefor duly set up by respondent.  20.  The lands from which the income herein involved was derived were property held by petitioners primarily for sale to customers in the ordinary course of the trade or business of the petitioners.  OPINION.  DISNEY: Petitioners on their income tax returns for 1935 included in income 30 percent of net gains reported from sales of real estate in the Repetto Ranch subdivision.  Respondent held that the income was from sales of property held primarily for sale to customers in the ordinary course of the trade or business of petitioners and therefore included in their taxable income the entire amount, under section 117(b), Revenue Act of 1934. 1*1177 *661  Our question is, Was the property disposed of during 1935 from Repetto, and from which income was realized, "property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business" under the above statute?  We have our attention directed to various cases upon the subject.  However, we think that those really contributing in any essential way to the solution of our problem, or greatly similar in fact, are limited to ; ; ; ; and . Other citations reflect light upon the question only indirectly.  After reviewing the above cases and others less helpful, we come to the conclusion that the lands involved must be considered with the above quoted language of the statute.  We are unable to distinguish this case in principle and in determinative fact from the Richards, Solomon, and Boeing cases above.  Phipps v. Commissioner rests upon*1178  the conclusion that the transactions in the taxable year were not sufficient to constitute doing business, and Pope v. Commissioner merely decides that the officers and chief stockholders of a corporation were not engaged, merely because of that relation, in the business conducted by the corporation, the court assuming the corporation to be in business and passing only upon the position of its principal officers and stockholders.  That is, of course, not the present case.  It seems to us that the question here is controlled particularly by the Richards and Boeing cases.  The latter was invoked by petitioners as decided by the Board, but has since been reversed.  The petitioners here urge that the land herein involved was originally acquired and held for investment.  We agree.  But the same is true in both of the cases last above named.  In the Boeing case, as herein, much of the land had been inherited years ago and held for investment.  It is likewise true, we think and we have found, that the petitioners were not in the real estate business, aside from the activities in connection with Repetto Ranch; but neither was Richards, and Boeing was a retired airplane*1179  manufacturer.  Both simply devoted lands previously held for investment, or for another purpose, to a business purpose, in a manner remarkably parallel to that involved here.  Petitioners urge the stress of necessity which forced the petitioners to carry on the subdivision started by Ransom.  Yet the stress seems no greater than it was in the case of , whose property had become so valuable as to be unprofitably devoted to intensive truck farming and packing and had become encumbered by assessments for public improvements.  This is essentially the situation facing the petitioners.  The only way a profit satisfactory to them could *662  be obtained was by carrying on a subdivision business.  It is obvious, we think, that Richards and the petitioners might have sold the property, as a whole, without going into business with it.  The price desired might not have been secured in that way, it is true, but that only accentuates the idea that they went into a business to obtain a better price than was obtainable by selling the property as investment property as a whole, or at least without going into the real estate business.  Keller testified in effect*1180  that petitioners did better than most subdividers "in that bracket" as to landscaping and improving.  The subdivision obviously therefore was comparatively attractive, yet he also testified that he made no particular effort to sell the whole or any part of the property as acreage, though there were offers to buy the Repetto Ranch.  Asked whether after 1934 the petitioners ever instructed him to sell any property as acreage, he could recall only three cases of about 3 acres, 5 acres and 17 1/2 acres, respectively, with only the last positively after 1934.  He also said that he did not solicit offers of purchase of any of the property as acreage, though he had been approached, that some sales pending at the time of hearing came unsolicited, that there were subdivisions adjacent to the Repetto Ranch, which continued through 1934 and 1935 and still continue, but that the persons conducting such real estate subdivisions were not approached for the purpose of acquiring the Repetto property, that on the contrary approach came from the other side.  "We have a good subdivision; people come to us wishing to buy." From all of this we must conclude that it was not impossible for this property*1181  to be sold as acreage or investment property, not unreasonable to think it could have been so sold for some price not wholly unfair, in spite of Keller's further statement to the effect that there was no way of disposing of the property other than carrying on with the subdivision unless it was given away.  This he modified by saying that subdividing was the "only practical manner in which it could be sold." It thus appears that the property was desirable to others in its subdivided state, that no particular effort was made to sell it as acreage, that approaches were made, that a "practical way" in the mind of Keller included and meant a way not disadvantageous, and that therefore the reason for carrying on the subdivision was a desire for a greater price than could have been obtained by sale as acreage.  Assuming that necessity could under any circumstances decide this question, one relying upon necessity as forcing him to go into business in order to liquidate an investment must logically demonstrate that he could not sell at all, or at least not for any substantial amount, without going into business.  Here we think the contrary has been indicated.  The amount of the liens for*1182  improvements, assessments, *663  etc., does not appear large in comparison with the price set upon the property.  On May 16, 1932, upon the final agreement with Ransom, the purchase price set was $1,299,978.25.  The liability for public improvements under the Improvement Bond Act of 1911, the Mattoon Act, and under drainage was only $256,000 and from August 1, 1933, to December 31, 1935, approximately $70,000 was spent on improvements, except houses erected.  Even if a sharp decrease in value of the property is considered, as we do because lots decreased about half in value, yet it still appears that the property was not encumbered for its full fair value.  Certainly no contrary showing has been made.  We are not convinced that sale as acreage, as investment property, without going into business with it, would have been disastrous, but rather, on the contrary, that it could have been so sold in some reasonable transaction.  A better financial result, and not necessity, thus appears as the reason for carrying on with the subdivision.  But however that may be, *1183 , refused, and we think properly, to apply the test of liquidation of investment property, saying: "This court has heretofore, in the case of , rejected the liquidation test in determining the question here involved." This was in spite of the fact that the Board had found as a fact that the taxpayer-seller's motive in selling was to liquidate his investment.  Such cases as , determining the question of a trust as against an association taxable as a corporation, are not controlling upon this question.  We therefore conclude that the desire to liquidate an original investment, even under some necessity to secure a profitable return, as in the Richards and Boeing cases and here, does not alter the fact of business actually entered into.  It is business none the less.  These cases dispose also of the petitioners' contentions they were not personally selling the property.  Engagement in business through an agency is equally as effective as personal participation.  *1184 The Richards case involved a selling agency in much the same manner as here, and contracts of employment by Boeing were held sufficient to put him in business without personal participation.  The numerous authorities need not be cited in order to hold that the business need not be petitioner's only or principal business.  There is no place, under the facts here, for any contention that the sales made were "isolated" or "casual." Beyond argument, we think they show the continuity and frequency characteristic of business transacted.  That they were made to customers and in the ordinary course is equally obvious.  We do not overlook the fact that in , the taxpayer conceded that he held the subdivided property previously for sale.  No such concession appears in the Boeing case, *664  nor in , cited and relied upon therein, and Richards' concession did not detract from his further contention as to "sale to customers in the ordinary course of his trade or business", which is, of course, the pivotal question.  Petitioners affirm, rather*1185  than deny, that the property was held primarily for sale.  In effect, it had always been for sale, but not in a subdivision.  Keller said: "My understanding was that I was to offer most anything that was in southern California and refer it to the executors." Sidney M. Ehrman said: "They wanted to sell the land and realize on it" and "They wanted to make an outright sale either for cash or for a substantial cash payment", but they were opposed to subdivision schemes.  It thus appears that the case in this respect is in no different position from that conceded in the Richards case.  We are unable to distinguish the situation here from that in the Richards and Boeing case.  The petitioners prior to reversal strongly relied upon the latter as parallel.  We conclude on their authority that the property was held by petitioners primarily for sale to customers in the ordinary course of their trade or business and that gains therefrom are ordinary and not capital gains.  See also Decision will be entered under Rule 50.Footnotes1. SEC. 117.  CAPITAL GAINS AND LOSSES.  (a) GENERAL RULE. - In the case of a taxpayer, other than a corporation, only the following percentages of the gain or loss recognized upon the sale or exchange of a capital asset shall be taken into account in computing net income: * * * 30 per centum if the capital asset has been held for more than 10 years.  (b) DEFINITION OF CAPITAL ASSETS. - For the purposes of this title, "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. ↩