Williams v. Commissioner

Jay Williams (plaintiff) located timberland parcels for buyers. In 1951 he found parcels for client Housley, who could not pay and instead gave Williams an unsecured, non-interest-bearing promissory note for $7,166.60; Williams understood Housley could not honor it until he bought timber property and turned a profit. Williams tried unsuccessfully 10 to 15 times to sell the note. In 1954 Housley paid $6,666.66 to discharge the debt, which Williams reported as 1954 income. The Commissioner (defendant) determined Williams should instead have reported the note's value as income in 1951.

Whether a promissory note received merely as evidence of indebtedness, and not intended as payment, is income at the time of receipt.