Brief Fact Summary. Petitioners are in the business of providing information on parcels of timberland to potential buyers. They provided information to one buyer in 1951 who was unable to pay for the information at the time. In return he issued a note in the amount of $7,166 to Petitioners payable at a later date.
Synopsis of Rule of Law. A note received only as security or as evidence of indebtedness and not as payment may not be regarded as income at the time of receipt.
COMPENSATION PAID IN NOTES.—Notes or other evidences of indebtedness received in payment for services constitute income to the amount of their fair market value.View Full Point of Law
Issue. Did receiving the note in 1951 result in income in that year?
Held. The Tax Court reversed the Commissioner and held that the note did not constitute income to Petitioners in 1951.
Discussion. The Court noted that the note bore no interest and was not secured and was not payable until 1952. Further, Petitioners were able to demonstrate that the note had no fair market value because they were not able to sell it despite trying.