Leisure Dynamics, Inc., (Formerly Lakeside Industries, Inc.) v. Commissioner of Internal Revenue

BRIGHT, Circuit Judge.

In 1965, taxpayer-appellant, Leisure Dynamics, Inc. (formerly Lakeside Industries, Inc.), a toy manufacturer, paid $102,676.45, for the right to manufacture dolls in the likeness of animated doll characters known as “Gumby” and “Gumby’s Pal, Pokey” (a horse) that have appeared on television cartoon series entitled “The Adventures of Gum-by.” Taxpayer considered this sum of money a royalty payment and therefore deductible from gross income. The Commissioner denied this deduction, asserting that the payment represented a capital investment, i. e., an installment paid…