of any additional credits made to this contract as provided herein.'
The taxpayer paid on each contract a total consideration of $ 9,750. He exercised the privilege contained in each of the contracts of paying these installments in advance and had completely paid for the contracts by 1948.
On May 26, 1956, the contracts matured and he surrendered them to the company, receiving therefor a total of.$ 27,360.96, or $ 7,860.96 in excess of what he paid on both these contracts. The.$ 27,360.96 was composed of the $ 25,000 total face amounts of the two contracts plus the additional credits provided under the agreements. Whether this excess should receive capital gain treatment or should be subject to ordinary income taxation is the question for the court's determination.
Reduced to simple terms the issue is analogous to a corporation issuing a bond in face amount of $ 150 payable without interest ten years from date. A taxpayer purchases the bond for $ 100, payable either at one time or in installments. When the bond is redeemed taxpayer has a profit of $ 50. Is this $ 50 ordinary interest income or is it capital gain?
Upon a most thorough review and analysis of the pertinent statute and the authorities, I am satisfied that the better view and best reasoned conclusion supports the reasoning that plaintiff is entitled to capital gain treatment, Edith K. Timken v. Commissioner, 6 T.C. 483; Clara E. Martin Estate v. Comm., 7 T.C. 1081; Adolph Klein v. Commissioner, 15 T.C. 26; Carl Oestreicher, Trustee v. Commissioner, 20 T.C. 12; J. I. Morgan, Inc. v. Commissioner, 30 T.C. 881; Eli Goodstein v. Comm., 30 T.C. 1178, 1193; Commissioner of Internal Revenue v. Caulkins, 6 Cir., 144 F.2d 482.
In addition to the Sixth Circuit, only the Ninth Circuit has made a determination of this identical question. The Ninth Circuit Opinion, very recently decided, is contradictory and irreconcilable with the Sixth Circuit, Commissioner of Internal Revenue v. Morgan, 272 F.2d 936.
I am satisfied that the Sixth Circuit has evaluated the question with great acumen and assiduous study, and that their views express the tenor and purport of the statute.
I see no basis of deciding to the contrary to their learned decision. I might add that I have had the privilege to sit with this distinguished court and my respect for the capabilities and learning of my distinguished brethren is limitless.
An appropriate order is entered.