United States v. Eben H. Carruthers and Nancy Carruthers

This is an action for the recovery of individual income taxes collected from appellees by a former Collector of Internal Revenue of the United States for the District of Oregon for the calendar year 1950.

On February 9, 1951, the appellees filed a joint income tax return for the year 1950 reporting a total net income of $36,927.44 and a tax liability of $10,-581.98, which was duly paid. In this return the appellees included as ordinary gross income the total amount of $38,-976.75, received from the E. H. Car-ruthers Company in accordance with a. contract executed on May 27, 1950, between Carruthers and the company for the transfer of patent rights.

On October 2, 1951, the appellees filed an amended joint income tax return showing a net income of $28,419.06 and. a timely claim for refund on Form 843 for $3,635.92, upon the ground that the-amount of $17,016.75 received by ap-pellee in the year 1950 as provided in the-contract with the company of May 27, 1950, represented profit to him on the sale of patent rights as a long-term capital gain rather than as ordinary income.

Appellees filed a claim for refund but. did not receive a notice of disallowance. They commenced this action…