Cowden v. Commissioner

The Cowdens (plaintiffs) arranged to receive an oil-lease bonus in yearly installments rather than as a lump sum Stanolind was ready to pay immediately, receiving promissory notes for the delayed payments, and assigned their rights to those future payments to a bank at a nominal discount, reporting the resulting income as capital gains at the time of each assignment; the Commissioner (defendant) and Tax Court instead required the Cowdens to report the full fair market value of the bonus as ordinary income in the year the obligation was incurred, reasoning heavily on the fact that Stanolind was willing and able to pay the full amount immediately but paid in installments solely to minimize the Cowdens' taxes.