Harry B. Smith and Mary L. Smith v. United States

KALODNER, Circuit Judge.

This appeal by the United States presents the issue as to whether the District Court erred in rendering judgment 1 for the taxpayer, Harry B. Smith, 2 in his suit for refund of income taxes paid for the years 1951 and 1952 on patent royalties which were treated as ordinary income pursuant to then current rulings of the Commissioner of Internal Revenue.

Taxpayer’s suit for refund was premised on the Act of June 29, 1956 (70 Stat. 404) which amended the Internal Revenue Code of 1939 by adding Section 117(q), 26 U.S.C. § 117(q) 3 which provided that royalties of the type…