Joe S. Ray v. Commissioner of Internal Revenue

The petitioner, Joe S. Ray, the owner of a substantial tract of timber land, entered into a written agreement in 1952 with Mengel Company under which it was to acquire 40,000 cords of pulpwood over a period of ten years at the market price prevailing at the time of cutting and delivery. At the time of the execution of the agreement, there was an advance from Mengel to Ray of $40,000, stipulated as $1.00 per cord for the pulpwood covered by the contract. The Petitioner contended that this advance was entitled to capital gains treatment, in computing his federal income tax, under the provisions…