Martin Ice Cream Company v. Commissioner

Arnold Strassberg incorporated his part-time ice cream business as Arnold’s Ice Cream. Strassberg gradually expanded to full-time operations, forming relationships with the owners and managers of various supermarket chains. Arnold’s Ice Cream later went bankrupt, but the relationships remained, and Strassberg returned to the business as Martin Ice Cream Co. (MIC) (plaintiff) a few years later. There was no employment agreement between Strassberg and MIC. Ruben Mattus, the creator of the Haagen-Dazs ice cream brand, sought Strassberg’s expertise in ice cream distribution and marketing. Strassberg became the first distributor of Haagen-Dazs, which successfully carved out a niche in the ice cream market. Several years later, the Pillsbury Co. acquired Haagen-Dazs and sought to consolidate distribution, which meant buying out middlemen such as Strassberg. Pillsbury representatives reached an agreement with Strassberg under which Pillsbury would acquire Strassberg’s supermarket relationships and distribution rights. Strassberg signed two documents, a bill of sale and an assignment of rights, in both an individual capacity and as president of MIC. The Commissioner of Internal Revenue (the commissioner) (defendant) sought to treat the $1,430,340 sales price as a gain realized by MIC. MIC challenged this assessment in federal tax court, insisting that the gain was realized by Strassberg as an individual.