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Income Tax Keyed to Graetz
Commissioner v. P.G. Lake, Inc.
Citation:
356 U.S. 260 (1958)Facts
In 1950, oil company P.G. Lake, Inc. (Lake) was indebted to its president in the amount of $600,000. In consideration for the cancellation of this debt, Lake assigned the president an oil payment right in the amount of $600,000 plus interest to accrue on the unpaid balance from month to month. As anticipated by the parties, the president recouped the full loan amount over approximately three-and-a-half years. Lake reported the sale of the oil payment right as a long-term capital gain. The Commissioner of Internal Revenue asserted a deficiency, finding that the sale resulted in ordinary income.
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