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Miller v. Commissioner of Internal Revenue

decided: February 6, 1962.

HELEN D. MILLER, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.



Author: Kaufman

Before WATERMAN, KAUFMAN and MARSHALL, Circuit Judges.

KAUFMAN, Circuit Judge.

Petitioner is the widow of Glenn Miller, a band leader who achieved world fame about twenty-five years ago. Allthough Glenn Miller died in 1944, petitioner has been able to engage in a number of enterprises actively exploiting his continuing popularity. Apparently "the good that men do," if sufficiently publicized, does live after them, for petitioner's commercial efforts have met with appreciable financial success.

Thus, in 1952, she entered into a contract with Universal Pictures Company, Inc. (Universal) in connection with the production of a motion picture film entitled "The Glenn Miller Story"; and in the calendar year 1954, she received $409,336.34 as her share of the income derived from that theatrical venture. According to the terms of the 1952 contract, petitioner had purportedly granted to Universal "the exclusive right to produce, release, distribute and exhibit * * one or more photoplays based upon the life and activities of Glenn Miller throughout the world"; and had warranted that she was "the sole and exclusive owner of all the rights" conveyed by her.

Petitioner now contends that the payment received in 1954 from Universal pursuant to that contract should be considered, for income tax purposes, as a "gain from the sale or exchange of a capital asset held for more than 6 months * * *" 26 U.S.C.§ 1222; while the Commissioner, whose position was sustained by the Tax Court, contends that the 1954 payment must be treated as ordinary income.*fn1 That is the difference between the parties, and in terms of taxes allegedly due in this case, it amounts to $159,850.71. Since there is little doubt on the facts presented here that there was a "gain," a "sale or exchange," and a holding "for more than 6 months," the specific question dividing the parties relates to the meaning of the term "capital asset." Furthermore, since Section 1221 of the Internal Revenue Code of 1954, 26 U.S.C.§ 1221, defines the term "capital asset" as " property held by the taxpayer * * *" (emphasis supplied), and since, if anything was held by anyone it was held by the petitioner,*fn2 the conflict is narrowed to the meaning of the word "property" for purposes of this section of the Code.

One would assume that since the question is so easily narrowed, the answer would be correspondingly free of difficulty. The assumption is unwarranted. The narrowing of a question does, ordinarily, reduce the complexity of the answer; but it also tends to increase the difficulty of reaching it.Moreover, in order to avoid creating more problems than we resolve, we wish to emphasize that throughout the ensuing discussion, our analysis of the term "property" is made within the context of capital gains taxation; universality in definition is not only unlikely, but undesirable.

The Internal Revenue Code does not define "property" as used in Section 1221. "It is here that the Code itself discloses the enormity of the problem." Surrey, Definitional Problems in Capital Gains Taxation, 69 Harv.L.Rev. 985, 988 (1956). This is one of those instances in which the drafters of that statute have (for obvious reasons) declined the challenge of preserving a chameleon in a pithy phrase. See 3B Mertens, Federal Income Taxation, § 22.12 (1958). Therefore, we must look outside the eight corners of the code for some elucidation.The ordinary technique is to refer to principles of state property law for, if not an answer, at least a hint. Since ultimately it is the Congressional purpose which controls, such non-tax definitions are certainly not binding on us.See Ernest A. Watson, 15 T.C. 800, 813 (1950), aff'd, on other grounds, 197 F.2d 56 (9th Cir. 1952), aff'd, 345 U.S. 544, 73 S. Ct. 848, 97 L. Ed. 1232 (1953); cf. Burnet v. Harmel, 287 U.S. 103, 110, 53 S. Ct. 74, 77 L. Ed. 199 (1932). On the other hand, Congress may be presumed to have had ordinary property concepts in mind so they are relevant to our inquiry.

Most people trained in the law would agree that for many purposes one may define "property" as a bundle of rights, protected from interference by legal sanctions. Cf. Restatement, Property, §§ 1-5. This concept is behind one prong of petitioner's attack. She cites several cases,*fn3 claiming they indicate that if Universal had made its motion picture without contracting with her, it would have been the victim of a substantial lawsuit.

Even if this were so, those cases would not compel this court to recognize, for income tax purposes, a "property right" in Glenn Miller himself if he were still alive. However, it is not necessary for us to reach a determination upon such an assertion. Those cases do not even remotely bear on the question whether such a property right,*fn4 if it existed, could pass to the sole beneficiary under his will; and certainly they lend no support to petitioner's theory that the reputation or fame of a dead person could give rise to such "property rights."*fn5 In fact, in the only case cited in which the rights of a dead man were considered at all, the court held against the claimant. Runyon, Jr. v. U.S., 281 F.2d 590, 592 (5th Cir. 1960). Indeed, petitioner is well aware of this, for she concedes that at the time of the "sale" there were "no clear-cut decisions * * * protecting publicity rights of a deceased celebrity * * *" (Pet.Br. p. 43).

Undeterred by her failure to find case authority which would substantiate the existence of "property rights" petitioner invokes the authority of logic. With considerable ingenuity, she argues:

(1) Universal paid petitioner $409,336.34 in 1954, which is a great deal of money.*fn6

(2) Universal was a sophisticated corporate being to which donative intent would be difficult to ascribe.

(3) If there was no danger in free use of Glenn Miller material,*fn7 why did Universal pay?

Petitioner appears to find this question unanswerable unless it is conceded that there was a sale of a ...


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