Commissioner of Internal Revenue v. J. I. Morgan and Frances Morgan

The facts which concern this review are set forth in the Findings of Fact of the Tax Court as follows:

The Commissioner determined that the annual increases listed in the last column of the foregoing statement, that is to say, the annual increases in the excess of the cash value of an Investors Syndicate certificate over the amounts paid in, represented interest taxable as ordinary income, and since taxpayers (Morgan and wife) kept their books and filed their federal income tax returns on the accrual basis, he held such interest taxable during each of the respective years of increase, namely, 1950 to 1954 inclusive.

The taxpayers, respondents here, petitioned the Tax Court for a redetermination, contending that the annual increment in the cash value of such a certificate is not properly taxable during the years of increase, but is taxable only upon retirement at maturity as capital gain under § 117(f) of the 1939 Code. This contention of the taxpayers was sustained in the Tax Court whose brief opinion was to the effect that the decision was ruled by the case of Commissioner of Internal Revenue v. Caulkins, 6 Cir., 144 F.2d 482 , which affirmed the Tax Court’s decision reported…