293 U.S. 172 (1934)
Zellerbach Paper Co. v.
Is the income derived from the sale of a part of a business operation considered capital gain, or is it taxable as ordinary income?
Income derived from the sale of business operations that constitutes an integral part of the company's ordinary operations is taxed as ordinary income rather than capital gain.
The Supreme Court held that the income Zellerbach Paper Co. derived from the sale was taxable as ordinary income, not as capital gain.
This case is significant for law students and tax professionals because it provides a clear legal framework for distinguishing between ordinary business income and capital gains. It underscores the importance of understanding not just the nature of the transaction but also its alignment with regular business activities. The Court's analysis and decision highlight the importance of evaluating the broader context of business operations in tax matters.