Commissioner v. P. G. Lake, Inc.

P. G. Lake (plaintiff), an oil and gas company, sold certain oil interests for a lump sum of $600,000, structured as payments over three years plus interest, while retaining title to the underlying oil-producing property itself; the buyer received only the right to receive those future lease payments, not ownership of the property. Lake reported the proceeds as capital gain from a long-term asset sale; the Commissioner (defendant) determined the proceeds were ordinary income, and the Tax Court and court of appeals both ruled for Lake.