Larry L. Beeler and Cynthia J. Beeler - Page 20

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            from the buyers for unmined sand.  The parties to the exchange                              
            believed they were not required to comply with Florida's bulk                               
            sales law, which applied to sales of stock in trade.  From the                              
            time petitioners first agreed to exchange the property for $1.2                             
            million to the time they closed on the exchange, petitioners sold                           
            about 130,000 cubic yards of sand.  Petitioners did not adjust                              
            the price of the 76.5 acres based on the sales.                                             
                  Respondent cites Watson v. Commissioner, 345 U.S. 544                                 
            (1953), to support the contention that petitioners held the                                 
            unmined sand primarily for sale at the time of the exchange.  In                            
            that case, the taxpayer sold an orange grove with unharvested                               
            oranges.  The buyer wanted to operate the orange grove and sell                             
            oranges, including the unharvested oranges.  The issue was                                  
            whether the portion of the price attributable to the unharvested                            
            oranges was taxable as a capital gain or as ordinary income.  The                           
            Supreme Court pointed out that the parties attributed substantial                           
            value to the unharvested oranges and held that income from the                              
            sale of the unharvested oranges was ordinary income.  Id. at 550-                           
            551.  The seller sold and the buyer bought a crop of growing                                
            oranges and the real property on which it grew.                                             
                  The Supreme Court distinguished Watson from Butler Consol.                            
            Coal Co. v. Commissioner, supra, and cases in which the sale of                             
            land included minerals "not separated from its natural state and                            
            not in the course of annual growth leading to a seasonal                                    

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