Court Opinion

ID: 9637200
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:00:19.829302+00
Date Added: 2024-06-11T18:09:54.409187
License: Public Domain

L. HAND, Circuit Judge
(concurring).
I do not think that the copyright or the literary property in the case before us was “property, used in the trade or business, of a character which is subject to the allowance for depreciation,” within § 117(a) (1); nor does it seem to me to be material that the exclusive license which the author granted to the Paramount Company did not convey “title” to either, as I assume it did not. I do think that both were “property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.” That Clifford Goldsmith was in “business” as a playwright, we have his own word for; and, although he had written only one play, he spent his time in exploiting it in various ways, in which he was very successful. This he did by licenses to producers of a stage play, by licenses to broadcasters and by the licenses to moving picture producers, whose proceeds are here in suit.
Copyright and literary property are monopolies; they entitle the owner to prohibit various kinds of reproduction, and to relieve individuals of these prohibitions by licenses. The licenses may do no more than excuse what would otherwise be infringements; or they may be exclusive, as in the case at bar. An exclusive license requires the author to protect the licensee against other infringement, and is for most purposes treated as “property”. I think that it is “property” within § 117(a) (1); that its grant is a “sale”; and that the licensee is a “customer in the ordinary course of * * * business” when the *468author is in business. There can be none but a verbal objection to this interpretation, for the general purpose of the section is plain enough. All property “held' by the taxpayer” is capital assets, but there are some kinds which he does not figure in separate items, when he parts with them in the course of “business”. One kind is “stock in trade,” or whatever else is normally included in an inventory. It would be absurd to expect of such items that a separate “gain or loss” should be kept as to each of these; and probably it would be impossible. An inventory supplies the place of such separate accounting, treating the whole stock or fund as though it were an entity. Again, it would be unreasonable to require a taxpayer to keep track of those chattels or other personalty, which are not sold “in the ordinary course of * * * business,” but are used as equipment or gear. These may be amortized by depreciation, which enters into his general income, as does his sale of such of them as he does not use up.
These two classes will exhaust the property “held” in many businesses; but there may also be goods which are neither “stock in trade,” nor of a kind which would ordinarily be inventoried. Nevertheless, the business may consist of selling these goods in “ordinary course”, to those whose custom the taxpayer seeks; and these are his “customers.” That the purpose of Congress was also not to treat such transactions as “capital gains or losses” is patent. Although each transaction is the sale of “property held by the taxpayer,” it is not considered as separate, but the transactions are all massed together for tax purposes as a single source of ordinary income, quite as though the taxpayer were giving his services for hire upon separate occasions. How numerous such transactions must be the statute answers only by the test that collectively they must constitute a “trade or business.” This being in my judgment what the section was aiming at, I see no reason to balk at the words used. It does not unduly strain the meaning of “sale” to make it include an exclusive license; in the case at bar the parties themselves used the words, “grant and assign”; and it would be a barren distinction — meaningless for fiscal purposes,— to say that the royalties for a stage production (which these, taxpayers included in their gross income) were income, but that the lump sums, paid instead of royalties by the Paramount Company, were capital transactions, because they were not “sales”.I can find nothing in the history of the legislation which intimates the contrary of this construction, and it seems to me that the Board in Avery v. Commissioner, 47 B.T.A. 538, chose the better ground than did the Tax Court here.
There is no reason to ask for any further findings of fact; I rely only upon those which the Tax Court has found. My only difference with it is that I find that the facts bring the case within the next to last, and not within the last, clause of § 117(a) (1). For these reasons I concur.
I am authorized to say that Judge SWAN concurs in this opinion.