Spiridon Spireas v. Commissioner of Internal Reven

HARDIMAN, Circuit Judge.

This appeal requires us to decide whether royalties paid on a technology license agreement should have been treated as ordinary income or as capital gains. The distinction is significant for taxpayers like the Appellant, Dr. Spiridon Spireas, who earned $40 million in such royalties over just two tax years. If those earnings were ordinary income, Spireas owed a 35 percent tax; if they were capital gains he owed 15 percent.

Spireas claimed the favorable capital gains treatment pursuant to 26 U.S.C. § 1235 (a), which applies to money received "in consideration of" "[a]…