(1942) Tags: Fox
Molnar v. Commissioner of Internal Revenue
On August 26, 1941, the taxpayer assigned to one Boris Morros, a domestic motion picture producer residing in the United States, motion picture rights throughout the world to a short story, of which the taxpayer was the author, entitled “the Marshal,” for the consideration of $2,550. “The Marshal” had been registered for copyright in the year 1929. The motion picture rights sold to Boris Morros were exercised by him in the production of a motion picture called “Tales of Manhattan,” of which “The Marshal” was a part.
The picture “Tales of Manhattan” was distributed by Twentieth Century-Fox Film Corporation in 1942. From August 1942 Twentieth Century-Fox Film Corporation received $1,886,741.10 as gross income for exhibiting the picture “Tales of Manhattan” in the United States up to December 30, 1944, and $1,219,646 for exhibiting it throughout the foreign field up to the end of November 1944. The receipts from foreign sources of Twentieth Century-Fox Film Corporation for “Tales of Manhattan” during the year 1941 were therefore in the neighborhood of 39 per cent of the aggregate receipts from that picture from both domestic and foreign sources. The percentage attributable to “The Marshal” was not shown.
The taxpayer, in computing his income tax for 1941, deducted from his gross income — as the portion properly attributable to sources without the United States — 40 per cent of the lump-sum payments received for licensing the above motion picture rights in the two works we have mentioned. The Commissioner disallowed the deductions and found that the entire income received by the taxpayer during the year 1941 should have been reported as income from sources within the United States. He accordingly determined the deficiency of $3,684.71, which the Tax Court affirmed. The taxpayer argues this amount.