Court Opinion

ID: 4479250
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:33.679526+00
Date Added: 2024-06-11T12:49:42.412814
License: Public Domain

Fat, /., dissenting: I respectfully disagree with the majority opinion of the Court that this case should be governed by General Artists Corporation, supra. While the agency contracts in General Artists were similar to those in the instant case, nevertheless, the agreements in the respective cases providing for the sale or assignment of these agency contracts were of sufficient dissimilarity to warrant here a result different from that reached in General Artists. In the latter case the taxpayer (the original agent) purportedly entered into an agreement with another agent to sell its agency contracts with Frank Sinatra. The agreement expressly provided that the purchaser was to enter into new contracts with Sinatra and that these contracts were to supersede and cancel the taxpayer’s contracts with Sinatra. The purchaser agreed to pay the taxpayer 50 percent of the compensation due from Sinatra under the new contracts for the next 5 years and 25 percent on renewals or extensions beyond that date. In holding that no sale or exchange had taken place within the meaning of section 111 of the 1939 Code we stated, “The effect of the agreement was not to sell anything but to permit MCA and Sinatra to enter into new contracts under which MCA would be the exclusive agent of Sinatra instead of the petitioner.” In the instant case the contract between the petitioner and the Morris Agency specifically provided that petitioner “assign, transfer and set over unto” the Morris Agency as of August 16,1954, all of Small’s “right, title and interest” in and to said agency contracts. The contract did not provide, as did the contract in General Artists, that the purchaser was to enter into new contracts with the artist and that the new contracts would cancel the original agency agreements. The majority opinion indicates that since what was accomplished in each case was merely the substitution of one agent for another, the difference in the “form of the transaction” should not lead to a different result. The majority seems to overlook the fact that the question before us is whether or not a sale or exchange has taken place. The fact that several means may produce the same end does not necessarily mean that the means are all the same. For example, a corporation may obtain money from its stockholders by either a loan or a contribution to capital. No court has yet seen fit to hold that all such advances, regardless of form, are either loans or contributions to capital because the end result is the same. To the contrary, each case must be decided on its own peculiar facts. Gooding Amusement Co., 23 T.C. 408, 418, affd. 236 F. 2d 159 (C.A. 6, 1956), certiorari denied 352 U.S. 1031 (1957). This principle is equally applicable to this proceeding. Here, the petitioner and the Morris Agency entered into an agreement whereby the Morris Agency acquired rights from the petitioner which it did not previously possess. These rights, with the exception of the motion-picture contract, were acquired from the petitioner and not from Purdom. On the other hand, in General Artists the taxpayer relinquished its rights under the agency contracts and MCA acquired its rights from the actor under a separate contract. The Second Circuit, in affirming our finding in the General Artists case, specifically referred to the fact that the transaction involved not an assignment of rights but a release or surrender to the obligor of a negative covenant in order to allow a new covenant to be made with the third party. General Artists Corporation v. Commissioner, 205 F. 2d 360 (C.A. 2, 1953). For this reason I do not believe that the General Artists case is controlling here. Furthermore, I am of the opinion that the cases in which the grantor or licensor pays the grantee or licensee in order to effect the termination of the jural relationship between the parties are also distinguishable on their facts. See and compare Commissioner v. Starr Bros., 204 F. 2d 673 (C.A. 2, 1953); Leh v. Commissioner, 260 F. 2d 489 (C.A. 9, 1958); Commissioner v. Pittston Company, 252 F. 2d 344 (C.A. 2, 1958). In these cases, as in General Artists, the contract rights either by implication or by expression were not transferred but were released and merely vanished. The record in the instant case establishes that the rights possessed by the petitioner were transferred to the Morris Agency. The rights did not vanish but were delivered to another in return for the payment of a substantial sum of money. Such circumstances are the foundations upon which sales are built. Finally, while the majority did not expressly indicate its feelings with regard to whether the rights transferred were capital assets, I feel that the question should be resolved. To this end it is my opinion that the exclusive right to represent a public figure is a valuable property right and, under the circumstances of this case, a capital asset. Cf. Commissioner v. Goff, 212 F. 2d 875 (C.A. 3, 1954); Aircraft Mechanics, Inc., 30 T.C. 1227 (1958). It is my opinion, however, that not all oí the money received by the petitioner represents sums received for the sale or exchange of a capital asset. I agree with the majority that insofar as the motion-picture contract is concerned no sale or exchange was effected. This is by reason of the fact that the Morris Agency was already possessed of the right to represent Purdom in the motion-picture industry and, hence, did not acquire new rights from the petitioner with respect to this phase of Purdom’s theatrical activities. While the record is unsatisfactory as to the amount actually paid for each contract, under the principle announced in Cohan v. Commissioner, 37 F. 2d 540 (C.A. 2, 1930), I would allocate the sum of $5,000 to this contract and hold that such sum was received by petitioner for a cancellation of its rights under the aforementioned contract. Furthermore, since the petitioner would have received $5,676.33 as commissions on sums earned by Purdom under the Loew’s contract had it not assigned its contracts to the Morris Agency, I would hold that this much of the amount received by petitioner should also be taxed as ordinary income. Oppee and Train-, JJ., agree with this dissent.