Reid v. Commissioner
United States Tax Court
Petitioners were partners in a partnership which entered into an agreement with Fuller Laboratories, Inc. The agreement provided that the partnership could exploit a secret process owned by Fuller to manufacture and sell a drug. In return for the right to exploit the secret process, the partnership obligated itself to pay Fuller the greater of 10 percent of its net sales or 10 cents per unit of drug sold.
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Petitioners were partners in a partnership which entered into an agreement with Fuller Laboratories, Inc. The agreement provided that the partnership could exploit a secret process owned by Fuller to manufacture and sell a drug. In return for the right to exploit the secret process, the partnership obligated itself to pay Fuller the greater of 10 percent of its net sales or 10 cents per unit of drug sold. Held, the agreement is a license for tax purposes and the partnership's payments thereunder are royalties deductible under sec. 162 (a), I.R.C. 1954.
1Opinion of the Court
OPINION
Fat, Judge:
Respondent determined deficiencies in petitioners’ income tax for the taxable year 1960 as follows:
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Respondent conceded a part of each issue raised in the pleadings. The issues, as they remain for decision, are: (1) Whether the payments by Sherman Laboratories, a partnership, to Fuller Laboratories, Inc., totaling $124,032.86 during the year ending March 31,1960, are deductible in the taxable year 1960 by petitioners, partners of Sherman Laboratories, as royalty payments under section 162(a);2 and (2) if the aforedescribed payments are held to be an installment…
2Cases cited6 opinions
- Waterman v. MacKenzieSupreme Court of the United States · 1891
- E. I. Du Pont De Nemours and Company v. United StatesUnited States Court of Claims · 1961
- James H. Pickren and Lucie B. Pickren v. United StatesCourt of Appeals for the Fifth Circuit · 1967
- Commercial Solvents Corp. v. CommissionerUnited States Tax Court · 1964
- J. Strickland & Company v. United StatesCourt of Appeals for the Sixth Circuit · 1965
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3Cited by12 opinions
- Taylor-Winfield Corp. v. Comm'rUnited States Tax Court · 1971
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- Nassau Suffolk Lumber & Supply Corp. v. CommissionerUnited States Tax Court · 1969
- Shepard v. Comm'rUnited States Tax Court · 1972
- Leisure Dynamics, Inc. v. CommissionerUnited States Tax Court · 1973
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