Hudson v. Commissioner

Galvin Hudson and Hillsman Taylor (plaintiffs) each purchased a 50% interest in a court judgment for a combined $11,004; when the judgment debtor, Cole, paid $21,150 to satisfy the judgment in full, the plaintiffs reported the resulting gain as long-term capital gain. The commissioner (defendant) disallowed this characterization and taxed the gain as ordinary income; the parties stipulated the judgment was a bona fide capital asset in the plaintiffs' possession.