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General Aniline & Film Corp. v. Commissioner of Internal Revenue.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


January 3, 1944

GENERAL ANILINE & FILM CORPORATION
v.
COMMISSIONER OF INTERNAL REVENUE.

Petition for review of a decision of the Tax Court of the United States.

Author: Frank

Before L. HAND, CHASE, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

We incline strongly to the belief that title to the patents passed to petitioner. Littlefield v. Perry, 21 Wall. 205, 22 L. Ed. 577.*fn1 However, the passing of title does not preclude the existence of royalties. But the crucial question here is whether the royalties are income to I.G. within the meaning of this tax statute. Under one of the contracts, a lump sum payment was made for the assignment. Such a payment is clearly not covered by the statute. The same would be true as to the other four contracts if the consideration had been payable in installments, none of which was contingent upon future profits. Under each of those four contracts a down payment was made which cannot as a matter of law be recovered by petitioner even if the profits derived by it from the patents never equal the amount of the initial payment; as those payments are not contingent upon future profits they are outside the statute. We need not now decide whether the future payments, under those four contracts, which depend wholly upon future profits, must be treated otherwise.*fn2

Reversed.


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