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and reported the proceeds received as capital gains. We upheld
the Commissioner’s determination that the settlement proceeds
were received as ordinary income. Id. at 266. Specifically, we
held where only one party to an income event receives property, a
sale or exchange does not occur. Id. at 265.
Petitioners attempt to distinguish our holding in Nahey v.
Commissioner, supra, on the following basis:
Although Nahey involved a sale and a contingent claim,
in Nahey, the court was faced with a situation in which
the purchaser obtained the contingent claim in the
sale, and pursued the claim to settlement, rather than
the situation which faces this Court, wherein the
sellers obtained the claim as part of a transaction in
which they disposed of their entire stock interest.
Under petitioners’ theory of the case--that they received the
lawsuit from Norway in exchange for their stock in BFI--they were
as much “purchasers” of the lawsuit as the taxpayer in Nahey.
The only difference was in the consideration used. In Nahey, the
purchasers used cash, whereas petitioners contend that they used
stock in this case. If petitioners are attempting to make a
distinction between what was a “sale” in Nahey and what is,
purportedly, an “exchange” in this case, we do not believe Nahey
is distinguishable on that basis. Moreover, petitioners emerged
from the transactions as the holders of the insurance claim and
lawsuit. They then proceeded to collect on that claim through
settlement of the lawsuit. Those are the facts which this Court
found essential in Nahey, and those are the facts which we find
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