In a number of cases, taxpayers and respondent have sought to invoke the “disappearing asset” theory, but that theory was found to be inapplicable where a close scrutiny of the substance and reality of the transaction in issue indicated that much more was involved than mere “vanishing assets.” In Commissioner v. Ferrer, 304 F.2d 125, 131 (2d Cir. 1962), revg. and remanding 35 T.C. 617 (1961), the cancellation of a contract entitling the taxpayer to produce the play “Moulin Rouge” (so that rights to produce the play could be transferred to another producer) was treated as a sale or exchange. In Bisbee-Baldwin Corp. v. Tomlinson, 320 F.2d 929, 931-932 (5th Cir. 1963), a cancellation fee was treated as arising from a sale or exchange where, in substance, the underlying mortgage servicing contract was transferred to a third party.

On the other hand, the sale or exchange of an exclusive right to use or possess specific property will produce capital gain. United States v. Dresser Industries, Inc., 324 F.2d 56 (5th Cir. 1963); Commissioner v. Ferrer, 304 F.2d 125 (2d Cir. 1962), revg. in part 35 T.C. 617 (1961); Commissioner v. McCue Bros. & Drummond, Inc., 210 F.2d 752 (2d Cir. 1954), affg. 19 T.C. 667 (1953), cert. denied 348 U.S. 829 (1954); Commissioner v. Ray, 210 F.2d 390 (5th Cir. 1954), affg. 18 T.C. 438 (1952), cert. denied 348 U.S. 829 (1954); Commissioner v. Golonsky, 200 F.2d 72 (3d Cir. 1952), affg. 16 T.C. 1450 (1951), cert. denied 345 U.S. 939 (1953).

In the agreement between Muzak and petitioner dated January 31, 1962, petitioner's Muzak franchise was terminated and canceled upon the condition that standard franchises be entered into between Muzak and Irvine and C & G Electronics Co. Moreover, despite cancellation and termination of petitioner's franchise, petitioner was given the right, both in the Irvine and C & G contracts and in the January 31, 1962, agreement with Muzak, to take over the separate franchises issued to Irvine and C & G Electronics Co. in the event of default by the purchasers. Consideration of Commissioner v. Ferrer, 304 F.2d 125 (C.A. 2, 1962), modifying 35 T.C. 617 (1961), is relevant at this juncture. The facts in that case may be summarized as follows: In 1951, Ferrer obtained the exclusive dramatic production rights to a play based on a novel written by one Pierre LaMure (the author).

Allocation issues regarding BPS gross receipts and expenses are particularly complex, and we do not adopt the conclusions of either expert witness. We and other courts have recognized that precision in deciding complex allocation issues is unattainable, but that we must do the best we can with the evidence presented. DeMink v. United States, 448 F.2d 867, 870 (9th Cir. 1971) (citing Ditmars v. Commissioner, 302 F.2d 481, 488 (2d Cir. 1962), rev'g and remanding T.C. Memo. 1961-105); Ditmars v. Commissioner, 302 F.2d at 488 (recognizing "that a rough approximation is all that can be expected" in that complex allocation case); Commissioner v. Ferrer, 304 F.2d 125, 135 (2d Cir. 1962) (stating that "no one expects scientific exactness" in complex allocation cases), rev'g and remanding 35 T.C. 617 (1961); Goosen v. Commissioner, 136 T.C. 547, 562 (2011).

While we recognize that precision in making such an allocation is unattainable, we must do the best we can with the evidence presented. Kramer v. Commissioner, supra; see DeMink v. United States, 448 F.2d 867, 870 (9th Cir.1971); Commissioner v. Ferrer, 304 F.2d 125, 135 (2d Cir.1962), revg. 35 T.C. 617, 1961 WL 1332 (1961); Ditmars v. Commissioner, 302 F.2d 481, 488 (2d Cir.1962), revg. T.C. Memo.1961–105.

While we recognize that precision in making such an allocation is unattainable, we must do the best we can with the evidence presented. Kramer v. Commissioner, supra; see DeMink v. United States, 448 F.2d 867, 870 (9th Cir. 1971); Commissioner v. Ferrer, 304 F.2d 125, 135 (2d Cir. 1962), revg. 35 T.C. 617 (1961); Ditmars v. Commissioner, 302 F.2d 481, 488 (2d Cir. 1962), revg. T.C. Memo. 1961-105.

However, it has also been acknowledged that section 1221 makes no mention of these judicially perceived motivations for capital asset treatment. Commissioner v. Ferrer, 304 F.2d 125, 133 (2d Cir. 1962), revg. and remanding 35 T.C. 617 (1961). There is "no single definitive" definition of a capital asset.

However, it has also been acknowledged that section 1221 makes no mention of these judicially perceived motivations for capital asset treatment. Commissioner v. Ferrer, 304 F.2d 125, 133 (2d Cir.1962), revg. and remanding 35 T.C. 617, 1961 WL 1332 (1961). There is “no single definitive” definition of a capital asset.

The above statement implies that whether investment risks are associated with contract rights transferred is a particularly relevant consideration in determining whether the rights are to be treated as capital assets. In Commissioner v. Ferrer, 304 F.2d 125, 130 (2d Cir.1962), revg. in part and remanding 35 T.C. 617 (1961), the Court of Appeals for the Second Circuit concluded, among other things, that where a taxpayer's “bundle of rights” reflected “something more than an opportunity, afforded by contract, to obtain periodic receipts of income,” and where they included “equitable interests” similar to those of an owner of property, they were to be treated as capital assets. The basic proposition of Commissioner v. P.G.

, petitioners contend that the passing of property or property rights to the debtor is not relevant in determining whether a sale or exchange occurred. In support of this argument, petitioners direct us to Commissioner v. Ferrer, 304 F.2d 125 (2d Cir.1962), revg. in part and remanding 35 T.C. 617 (1961). In Ferrer, the taxpayer acquired from an author the right to produce a play (based on the author's book) which included the right to prevent the author's transfer of film rights.