Marc D. Leh and L. Waive Leh v. Commissioner of Internal Revenue, David E. Brown and Christobel H. Brown v. Commissioner of Internal Revenue

These are petitions to review two decisions of the Tax Court. Int. Rev. Code of 1954, § 7482, 26 U.S.C.A. § 7482 . The sole question presented is whether the Tax Court was correct in refusing to find that the transaction herein involved constituted a “sale or exchange” of property within the meaning of section 117 (a) (4) and (j) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 117 (a) (4), (j). If there was such a “sale or exchange” then taxpayers were entitled to treat the consideration received by them for the cancellation of a contract as capital gain rather than ordinary income.

The facts, as found by the Tax Court are not disputed and many were stipulated. They are set forth in the margin.

These facts deal with the distribution of gasoline under a “master” supply contract between General Petroleum Cor poration (hereinafter referred to as General) and Olympic Refining Company (hereinafter referred to as Olympic).

On the facts found, the Tax Court held that the agreement of July 26, 1950, was not intended to, and did not effect a sale or exchange by The Progress Co., a partnership (hereinafter called Progress), to Olympic of the former’s rights under the Progress-Olympic…