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Hudson v. Commissioner

United States Tax Court
20 T.C. 734 (1953)


On November 23, 1929, Mary Mallory Harahan won a court judgment against Howard Cole for $75,702.12. On June 30, 1943, Galvin Hudson and Hillsman Taylor (plaintiffs) purchased the judgment. Each acquired a 50 percent interest in the judgment. Together, the plaintiffs paid a total of $11,004. In May 1945, Cole paid the plaintiffs $21,150 in full satisfaction of the judgment against him. Both plaintiffs reported the gain they realized as long-term capital gains for 1945. The Commissioner (defendant) disallowed the characterization of the proceeds as long-term capital gain and taxed them as ordinary income. All parties stipulated that the transaction between Cole and the plaintiffs was bona fide and that the judgment was property and a capital asset in the possession of the plaintiffs.

Rule of Law


Holding and Reasoning (Johnson, J.)

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