License vs. Sale of Film Rights

Cory vs. Comm. 23 TC 775 Dec. 20,842 (1955), aff'd, 230 F. 2d 941 (2d Cir. 1956)

The well-known philosopher and writer, George Santayana, had given the taxpayer various autobiographic works for the taxpayer's sole and exclusive exploitation. Taxpayer had entered into an agreement with Scribner's and Sons to publish the works. Taxpayer treated the transaction as a sale of the rights and reported the proceeds as a long-term capital gain. The Commissioner determined the transaction to be a license, not a sale. The Court found the transaction to be a license for the following reasons:

The publishing rights granted were not all exclusive as the taxpayer has stated
Amounts to be paid to the taxpayer were entirely dependent on the success of the book
Even though the rights granted to Scribner's could be assigned, the petitioner right to the flow of income produced there from would never be impaired
No provision existed whereby the property would ever become the property of Scribner's regardless of how much money was paid to the taxpayer
Even though the publishing rights which were granted were exclusive, the interest retained by the petitioner were of substance and not merely a naked title as in the Field and Herwig cases
Any infringement on the rights would affect the petitioner's profits as well as Scribner's

Fields vs. Comm. 14 TC 1202 Dec. 17,698 (1950)

Taxpayer sold the motion picture rights in the plays "My Sister Eileen" and "Doughgirls" for $225,000 (No mention of additional amounts). Court held that the granting of the rights was a sale of a property interest. The Court also held that the sale proceeds were taxable as ordinary income and not as a capital gain because the movie rights were not property used in a trade or business. Rather, the movie rights were property held primarily for sale to customers in ordinary course of trade or business, in part of the copyright assigned and not a license.

Bump "The Wire" up and watch it. It's good, entertaining stuff that is compulsive, once it hooks you.

I have no insights. I do, however, do the exact same thing. Actually, I should probably go manage my queue right now.

Pee-Wee... C'pher has a copy, so you can borrow that! The Metallica movie... watch it with the sound off so you can just see James Hetfield's hotness. Maybe play 'Dark Side of the Moon' on LP.

That Off the Charts documentary is really, really good. People, insane or delusional, send their heartfelt lyrics (and cash) to shady music publishing companies to have their words set to music by failed musician types with often hilarious results.