Court Opinion

ID: 4482152
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:20.570434+00
Date Added: 2024-06-11T15:03:38.256790
License: Public Domain

Fay, J., dissenting: I agree with the substance of Judge Hall’s dissent. I can see no distinction between Clay Brown and the instant case, and would conclude that a sale has occurred and that petitioners are entitled to capital gain or capital loss treatment. However, assuming that the majority is correct in its conclusion that the purchase price is excessive, I cannot agree that all amounts received by petitioners should be taxed as ordinary income. Petitioners have technically disposed of their entire interest in Kitro and Marilyn. The fact that petitioners might potentially recover their proprietary interest due to an ultimate default by the buyer does not negate the existence of a present sale. See Commissioner v. Brown, 325 F.2d 313, 316 (C.A. 9, 1963). Accordingly, I believe that petitioners are entitled to section 1222(3) or section 1222(4) treatment as to that portion of the purchase price which is not deemed to be excessive. In this context, there is analogous authority for characterizing only the “excessive” portion of the purchase price as ordinary income. See Roy J. Champagne, 26 T.C. 634 (1956); see also Goldstein v. Commissioner, 298 F.2d 562 (C.A. 9, 1962), affirming a Memorandum Opinion of this Court. DreNNEN, J., agrees with this dissent.