The sale of assets held by the taxpayer primarily for sale to customers in the ordinary course of business (such as grain or market livestock) usually produces ordinary income. That rule has encouraged gifts of grain and other farm commodities to spouses, children, grandchildren or other family members who are not considered to be holding the gift property for sale to customers. The outcome is capital asset treatment for gains and avoidance of liability for self-employment tax.
Harl, Neil E.
"Gifts of Grain and Other Farm Commodities,"
Agricultural Law Digest: Vol. 4
, Article 1.
Available at: http://lib.dr.iastate.edu/aglawdigest/vol4/iss4/1