Jorgen D. Bering and Winifred E. Bering v. Commissioner of Internal Revenue

Appellants seek review of a decision of the Tax Court upholding the Commissioner in assessing an income tax deficiency of $13,934.31 for the year 1963.

Appellant taxpayer is an inventor of a stainless steel valve, patent for which was obtained in 1959. The question presented is whether he is entitled to the income-spreading benefits of the original version of § 1302 of the Internal Revenue Code, 26 U.S.C. § 1302 (1958), as to the income derived “in respect of” the invention. The Tax Court held that he had failed to establish that “not less than 80 per cent of the gross income in respect of such invention” was received in 1963.

After securing his patent in 1959, taxpayer attempted unsuccessfully to interest others in obtaining licenses. Failing to do so, he had parts made by a machine shop and assembled them himself. His sales during 1959, 1960 and 1961 did not result in profit. Thereafter he was able to interest two large companies in his product and, since they did not wish to do their own manufacturing under license, commenced manufacturing the product himself. His income from the sale of the patented valve was, for 1963, substantially greater than in previous years.

Had the…