Before the acquisition of lands, the taxapayers had been advised that a shopping centre would not be economically feasible without an adjoining apartment dwelling project. However, zoning changes to permit the latter were not forthcoming.
Judson J. upheld the finding of the trial judge that the taxpayers, who were active and skilled real estate promoters, had their companies acquire the lands with a view to realizing a profit therefrom either from developing them as rental property (the shopping centre and apartment buildings) or, if that failed, by a sale of the lands (which latter event occurred at a profit). The fact that this alternative result was accomplished through a sale of shares rather than a direct sale of the land was irrelevant to the characterization of the gain (as "that this was merely an alternative method that they chose to adopt in putting through their real estate transactions" (p. 661).)