Commissioner v. P. G. Lake, Inc.
United States Supreme Court
356 U.S. 260 (1958)
- Written by Robert Taylor, JD
Facts
P. G. Lake, Inc. (Lake) (plaintiff), an oil and gas production company, sold certain oil interests for a lump sum of $600,000. Lake retained title to the property that generated the oil. The purchaser of the oil interests was entitled to receive the remaining payments on certain leases, which would amount to $600,000 over a three-year period, plus 3 percent interest on the unpaid lease amount. On its federal tax return, Lake reported the proceeds from selling these oil interests as a capital gain from the sale of long-term assets. The federal tax commissioner (commissioner) (defendant) determined a deficiency in Lake’s taxes, finding that the sales proceeds constituted ordinary income. Lake petitioned the United States Tax Court for a redetermination. The tax court ruled for Lake, and the commissioner appealed. The court of appeals affirmed the tax court’s decision. The United States Supreme Court granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Douglas, J.)
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