The Tax Court has considered similar situations many times and has uniformly held that a controlling stockholder may assign or license his patents to the corporation which he controls and that, if such transaction is entered into in good faith, it is a sale to the corporation and the income received by the licensor is entitled to capital gains treatment. Leonard Coplan, 28 T.C. 1189; Roy J. Champayne, 26 T.C. 634; Thornton G. Graham, 26 T.C. 730; Halsey W. Taylor, 16 T.C. 376. This consistent view taken by the Tax Court is entitled to great weight and should be followed unless this Court is convinced that it is clearly wrong.
Our conclusion as to whether the transaction constitutes a sale or exchange is based on a review of the circumstances surrounding the transaction as a whole. Id.; see also Graham v. Commissioner, 26 T.C. 730, 739-740 (1956); Mylan Inc. v. Commissioner, T.C. Memo. 2016-45, at *15-*16, *18-*19. If a person acts as a conduit or middleman, then he or she did not acquire a sufficient interest for a subsequent transfer to qualify as a sale or exchange.
This fact is the substance of respondent's case, but in the absence of applicable statutory authority for disallowance the benefits from the sale of a patent to even a directly controlled corporation are allowable. Leonard Coplan, 28 T.C. 1189 (1957); Roy J. Champayne, 26 T.C. 634 (1956); and Thornton G. Graham, 26 T.C. 730 (1956). In view of the foregoing we hold respondent's allocation of income from NSP to petitioner to be erroneous.
This fact is the substance of respondent's case, but in the absence of applicable statutory authority for disallowance the benefits from the sale of a patent to even a directly controlled corporation are allowable. Leonard Coplan, 28 T.C. 1189 (1957); Roy J. Champayne, 26 T.C. 634 (1956); and Thornton G. Graham, 26 T.C. 730 (1956). In view of the foregoing we hold respondent's allocation of income from NSP to petitioner to be erroneous.
While ‘The essence of ‘sale’ is a transfer of the property in a thing for money, ‘ Ratigan v. United States, 88 F.2d 919, 921 (C.A. 9), certiorari denied 301 U.S. 705, it is accepted that each situation must be decided on its own facts. See Thornton G. Graham, 26 T.C. 730; Resthaven Memorial Cemetery, Inc., 43 B.T.A. 683; Betty Rogers, 37 B.T.A. 897, affd. 103 F.2d 790 (C.A. 9), certiorari denied 308 U.S. 580. We have decided that petitioner owned property and it is clear that it received a fixed price in money from the payor.
The determinative factor as to the consequences of the conveyance of the rights in an invention or patent is the intention of the parties as evidenced by their contracts and the legal effect of those contracts. Watson v. United States, supra; Kronner v. United States (Ct. Cl.) 110 F.Supp. 730; Rose Marie Reid, 26 T.C. 622, 632; Thornton G. Graham, 26 T.C. 730, 739. The fact that the sales price is based upon production does not prevent the transaction from being a sale.