The taxpayers, who were experienced businessmen, acquired the assets of an insolvent corporation engaged in buying and selling machinery, using mostly borrowed money. They acquired the real estate directly, and the other assets through a newly-incorporated corporation. A few months later, after they were starting to lose confidence in the former management of the insolvent company, whom they had retained to manage the acquired enterprise, they sold both the real estate and the new company at a gain.
Before accepting the testimony of the taxpayers that (similar to their other enterprises) they acquired the business for the purpose of operating it indefinitely, so that their gain was on capital account (non-taxable), Noel J stated (at p. 5100) that "a profit resulting from the sale of a business is not a profit from a business" and further stated (at p. 5103):
To give to a transaction which involves the acquisition of capital the double character of also being at the same time an adventure in the nature of trade, the purchaser must have in his mind, at the moment of purchase, the possibility of reselling as an operating motivation for the acquisition; that is to say that he must have had in mind that upon a certain type of circumstances arising he had hopes of being able to resell it at a profit instead of using the thing purchased for purposes of capital.