Blum v. Commissioner of Internal Revenue

KALODNER, Circuit Judge.

These. appeals are from the decision of the Tax Court.

The question presented is whether periodical payments to the petitioner (“taxpayer”) of a percentage of a manufacturing corporation’s net sales of certain products were compensation taxable as ordinary income or whether they were consideration paid for the sale of several patents constituting capital assets and as such taxable as long-term capital gains.

The answer depends on whether the taxpayer “sold” the patents to the maker of the payments, Henry Disston & Sons, Inc., (“Company”) or whether the patents already…