Logan v. Commissioner
United States Tax Court
51 T.C. 482 (1968)
- Written by Matthew Celestin, JD
Facts
Frank A. Logan (plaintiff) and Thomas S. Dawson formed the law partnership of Logan & Dawson (the partnership). Under the partnership, Logan performed legal work on a contingent-fee basis. When Logan decided to retire, Dawson agreed to buy Logan’s partnership interest and assume all liabilities of the partnership. At the time of the sale, the partnership had work in progress that had not been billed to clients and was not being performed pursuant to any expressed agreements or written contracts. Pursuant to the buyout agreement, Dawson paid Logan for unbilled fees due to the partnership for the work in progress. Logan argued that the unbilled fees were not unrealized receivables within the meaning of § 751 of the Internal Revenue Code and therefore that the payment Logan had received for the unbilled fees was taxable as capital gains rather than as ordinary income. Section 751 provides that unrealized receivables are a partnership’s rights, contractually or otherwise, to be paid for services rendered or to be rendered by the partnership.
Rule of Law
Issue
Holding and Reasoning (Tannenwald, J.)
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