Rev. Rul. 72-48

A corporation which has realized one-third of the taxable income to be derived from property manufactured, constructed, produced or purchased is not on account of such manufacture, construction, production or purchase, a collapsible corporation within the meaning of section 341(b) of the Internal Revenue Code of 1954. Commissioner v. James B. Kelley, 293 F. 2d 904 (1961), affirming, 32 T.C. 135 (1959); Commissioner v. E. J. Zongker, 334 F. 2d 44 (1964), affirming per curiam, 39 T.C. 1046 (1963); and George W. Day v. Commissioner, 55 T.C. 257 (1970).

Revenue Ruling 62-12, C.B. 1962-1, 321, in which it was held that the Kelley case would not be followed, is revoked. The nonacquiescence to the decision of the Tax Court in Kelley, previously announced in C.B. 1962-1, 5, is withdrawn, and acquiescence is substituted therefor; acquiescences to the decision of the Tax Court are also hereby announced in Zongker and Day. See page 1 of this Bulletin.

Although such a corporation is not collapsible, the Internal Revenue Service is not precluded from applying other provisions of the Code to tax the gain as ordinary income.