TAXATION-FEDERAL INCOME TAX-TAXABILITY TO NONRESIDENT ALIEN OF LUMP SUM PAYMENTS FOR COPYRIGHT

Taxpayer, a nonresident alien author not engaged in trade or business within the United States, delivered certain literary works to American publishers under agreement whereby the latter were to copyright and publish these stories and reassign to the taxpayer after publication all rights except the American serial rights. Lump sum payments for each story were received during the years 1938 and 1941. No tax was paid on these amounts and a deficiency was assessed on the ground that they constituted royalties received for the use of United States copyrights and were taxable as ordinary income. The circuit court of appeals sustained the taxpayer's contention that the payments were proceeds from the sale of personal property and therefore exempt under Section 211 (a) (1) (A) of the Internal Revenue Code.

On certiorari to the Supreme Court, held, reversed. Justices Frankfurter, Murphy and Jackson dissented. Commissioner of Internal Revenue v. Wodehouse, 335 U.S. 807, 69 S.Ct. 1J20 (1949).