Tax Legal Services · Primary-source case analysis

Burnet v. Logan: Unvalued Contingent Payments Could Remain an Open Transaction Until Basis Was Recovered

By Aneeta Mishra and Timothy Chan

Published May 22, 2026

Burnet v. Logan concerned stock sold for cash plus a right to receive 60 cents for each ton of ore later apportioned to the buyer, with no minimum production or definite total payment.

The contingent right lacked an established value

The record did not support assigning a fair market value to the indefinite future ore payments at the time of sale.

The transaction therefore remained open

Without a reliable value for the promise, the seller was not forced to report a closed transaction based on speculation.

Basis was recovered before gain

Receipts were treated as return of capital until they equaled the relevant basis; later receipts could produce taxable gain.

The judgments were affirmed

The Court sustained the lower court’s treatment of the particular contingent-payment record.

Key takeaways

• Determine whether contingent rights have an ascertainable market value.
• Document basis before allocating later receipts.
• Track cumulative payments against recovered capital.
• Treat open-transaction reporting as an exceptional, fact-dependent method.