Taxation – Federal Income Tax – Treatment of Gains from Commodity Futures Transactions of Manufacturing Consumer

Taxpayer, a manufacturer of products made from corn, purchased and sold corn futures contracts as a part of its regular buying program in order to protect itself against a possible shortage of raw materials. Taxpayer contended that the gains realized on these transactions should receive capital asset treatment. The Tax Court and the court of appeals held that the gains constituted ordinary income. On appeal, held, affirmed. The transactions, though not true hedges, were entered into for business purposes and as an integral part of taxpayer’s operations. Consequently, they should be treated the same as hedges, and the gains from the transactions taxed as ordinary income. Corn Products Refining Co. v. Commissioner, 350 U.S. 46, 76 S. Ct. 20 (1955).