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status, as set forth in section 1221, are exhaustive and not
illustrative. Petitioners also contend that Arkansas Best
admonishes courts not to fashion additional exceptions to those
expressed in section 1221. See Ark. Best Corp. v. Commissioner,
485 U.S. at 217.
Both parties, to some extent, focus on the following
footnote in Arkansas Best:
Petitioner mistakenly relies on cases in which this
Court, in narrowly applying the general definition of
“capital asset,” has “construed ‘capital asset’ to
exclude property representing income items or
accretions to the value of a capital asset themselves
properly attributable to income,” even though these
items are property in the broad sense of the word.
United States v. Midland-Ross Corp., 381 U.S. 54, 57
(1965). See, e.g., Commissioner v. Gillette Motor Co.,
364 U.S. 130 (1960) (“capital asset” does not include
compensation awarded taxpayer that represented fair
rental value of its facilities); Commissioner v. P.G.
Lake, Inc., 356 U.S. 260 (1958) (“capital asset” does
not include proceeds from sale of oil payment rights);
Hort v. Commissioner, 313 U.S. 28 (1941) (“capital
asset” does not include payment to lessor for
cancellation of unexpired portion of a lease). This
line of cases, based on the premise that � 1221
“property” does not include claims or rights to
ordinary income, has no application in the present
context. Petitioner sold capital stock, not a claim to
ordinary income.
Id. n.5. Petitioners construe the Supreme Court’s statements in
that note as “pure dicta” with respect to the application of the
doctrine because of the seminal holding of Arkansas Best giving
effect to the express terms of section 1221. Respondent contends
that the footnote indicates that the Supreme Court did
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