Encyclopedia Britannica (Britannica) (plaintiff) decided to publish a book entitled The Dictionary of Natural Sciences. Ordinarily, Britannica would research, author, edit, and publish the book, as it was in the business of doing so. However, Britannica was short-staffed and hired David-Stewart Publishing Company (David-Stewart) to prepare the manuscript under the supervision of Britannica’s editorial staff. Britannica paid David-Stewart an advance against the royalties that Britannica expected to receive on the book. On its federal tax return, Britannica deducted the advance payment to David-Stewart as a business expense. The federal tax commissioner (commissioner) (defendant) disallowed the deduction and assessed deficiencies against Britannica. Britannica petitioned the United States Tax Court for a redetermination. The tax court entered judgment in favor of Britannica, and the commissioner appealed to the United States Court of Appeals for the Seventh Circuit.