Cri-Leslie, LLC v. Commissioner of Internal Revenue, 882 F.3d 1026

CRI-Leslie owned and operated the Radisson Bay Harbor Hotel (real property used in its hotel/restaurant trade) acquired in 2005.
In 2007–2008 CRI-Leslie entered a contract to sell the property for $39.2 million; buyer paid a $9.7 million nonrefundable deposit to be credited at closing.
The buyer defaulted in 2008 and forfeited the $9.7 million deposit, which CRI-Leslie retained.
On its 2008 return CRI-Leslie reported the forfeited deposit as long-term capital gain; the IRS recharacterized it as ordinary income.
The Tax Court (on stipulated facts, no trial) agreed with the IRS; CRI-Leslie appealed, presenting a pure statutory‑interpretation question under I.R.C. §§ 1221, 1231, and 1234A.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a retained nonrefundable deposit from a terminated contract to sell property used in the taxpayer’s trade/business qualifies as capital gain under I.R.C. § 1234A	§1234A should be read to give the same capital‑gain treatment to terminated-sales proceeds as to completed sales; legislative history and case citations show Congress intended to cover §1231 (trade/business) property	§1234A applies only to gains "with respect to property which is a capital asset"; §1221(a)(2) explicitly excludes property used in the taxpayer’s trade/business (including depreciable and real business property), so §1234A does not apply here	Affirmed: forfeited deposit is ordinary income because the property is excluded from the §1221 "capital asset" definition and §1234A therefore does not apply

Sirbo Holdings, Inc. v. Comm’r, 509 F.2d 1220 (2d Cir. 1975) (discusses tax treatment of payments related to termination of contract rights)
Billy Rose’s Diamond Horseshoe, Inc. v. United States, 448 F.2d 549 (2d Cir. 1971) (example cited in legislative history regarding termination payments on real‑property arrangements)
Alderson v. United States, 686 F.3d 791 (9th Cir. 2012) (interpreting §1234A as applying only where underlying property is a capital asset)
Ellis Banking Corp. v. Comm’r, 688 F.2d 1376 (11th Cir. 1982) (distinguishing accounting sense of "capital asset" from §1221 definition)
Barnhart v. Thomas, 540 U.S. 20 (2003) (last‑antecedent canon of statutory construction)
Meese v. Keene, 481 U.S. 465 (1987) (statutory definitions prevail over colloquial meanings)
Ocmulgee Fields, Inc. v. Comm’r, 613 F.3d 1360 (11th Cir. 2010) (de novo review of Tax Court statutory interpretation)
Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75 (1998) (courts must follow statutory text over asserted legislative concerns)
Connecticut Nat’l Bank v. Germain, 503 U.S. 249 (1992) (presumption that legislature says what it means)
Hamer v. Neighborhood Hous. Servs. of Chicago, 138 S. Ct. 13 (2017) (court should not rewrite statute based on speculative legislative intent)
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005) (odd statutory results do not necessarily produce absurdity warranting disregard of text)