Sol C. Siegel v. United States of America, Ethel B. Siegel v. United States

In these actions for refund of income taxes, the issue presented is whether fixed guaranteed amounts unconditionally payable to Sol C. Siegel Productions, Inc. under a motion picture production contract constituted taxable income to the corporation in the taxable years the income was collected, notwithstanding that the corporation reported its income on the cash basis and had assigned its right to receive the income (by way of a liquidation distribution) to its shareholders (the taxpayers-transferees) who then collected it. The Commissioner had attacked the distribution as an anticipatory assignment of income earned by and taxable to the corporation. The district court gave judgment to the plaintiffs. We reverse.

Mr. Siegel, a producer of motion pictures, was president and controlling shareholder of Productions. That corporation formed a joint venture in 1955 with Loew’s Inc., a major studio, for the production and distribution of a number of photoplays. The terms of the agreement were complex, but provided basically that Productions would furnish its skill in making films and Loew’s would pay the production costs and would distribute the end product. The two companies would own…