- 13 -
against him. In a hypothetical case, if the judgment had
been transferred to someone other than the judgment
debtor, the property transferred would still be in
existence after the transaction was completed. However,
as it actually happened, when the judgment debtor settled
the judgment, the claim arising from the judgment was
extinguished without the transfer of any property or
property right to the judgment debtor. In their day-to-
day transactions, neither businessmen nor lawyers would
call the settlement of a judgment a sale; we can see no
reason to apply a strained interpretation to the
transaction before us. When petitioners received the
$21,150 in full settlement of the judgment, they did not
recover the money as a result of any sale or exchange but
only as a collection or settlement of the judgment.
Id. at 736.
Despite these and other similar cases3, petitioners contend
that the passing of property or property rights to the debtor is
not relevant in determining whether a sale or exchange occurred.
In support of this argument, petitioners direct us to Commissioner
v. Ferrer, 304 F.2d 125 (2d Cir. 1962), revg. in part and remanding
35 T.C. 617 (1961). In Ferrer, the taxpayer acquired from an
author the right to produce a play (based on the author's book)
which included the right to prevent the author's transfer of film
rights. Subsequently, the taxpayer surrendered his rights (the
"lease") in exchange for the leading role in a film production.
The issue arose as to whether the surrendering of the taxpayer's
3 The Court of Appeals for the Seventh Circuit, the court
to which an appeal in this case lies, has distinguished sales or
exchanges from collections and other transactions in which no
property or property rights survive. See Chamberlin v.
Commissioner, 286 F.2d 850, 852 (7th Cir. 1960), affg. 32 T.C.
1098 (1959); Lee v. Commissioner, 119 F.2d 946, 948 (7th Cir.
1941), affg. 42 B.T.A. 920 (1940).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011