Tannenwald, Judge:
Respondent determined deficiencies of $1,447.20 and $26,177.38 in the petitioners’ Federal income taxes for 1969 and 1970, respectively. The issues now presented for decision are:
(1) Whether amounts received with respect to certain patent licensing agreements are taxable as long-term capital gain under section 12351 or as ordinary income;
(2) Whether a portion of damages received in 1970 in settlement of a patent infringement suit should have been accrued as income in 1968;
(3) Whether the surrender in 1969 of the right to receive certain royalties gave rise to a deduction or addition to cost in that year.
FINDINGS OF FACT
Some of the facts are stipulated and are found accordingly. The stipulation of facts and attached exhibits are incorporated herein by this reference.
Petitioners, husband and wife, resided in Detroit, Mich., at the time their petition was filed. They filed joint Federal income tax returns, amended joint returns, Federal partnership returns of income, and amended partnership returns for the years 1969 and 1970. At all material times, petitioners and their partnership have reported their income on the accrual basis. The events in question relate to the activities of David R. Blake, who will hereinafter be referred to as petitioner.
On July 24, 1948, petitioner applied for a United States patent on a leveling device (hereinafter referred to as a glide) for tables and chairs. A patent was issued with respect to this application on March 22, 1955. On June 24, 1954, petitioner entered into a "license agreement” with the American Seating Co. (hereinafter American or American Seating). Under that license, American was entitled to make, have made, use, and sell glides during the life of the patents. The license was limited to the public seating field, i.e., "furniture and equipment for schools, churches, chapels, courtrooms, hospitals, theaters, auditoriums, and vehicles used in transportation” but excluding "furniture designed primarily for restaurant and cafeteria use.”2 It provided for a royalty of eight-tenths of 1 cent (adjusted annually to reflect fluctuations in the consumer price index) on each glide sold by American. American agreed, among other things, not to compete with petitioner in the sale of glides per se (not incorporated in manufactured articles) outside the public seating field. The license could be made nonexclusive or canceled by petitioner if minimum royalties were not paid. It could also be canceled by either party on the other’s default. In the event the patents were infringed by a competitor of American, petitioner undertook to take action against the infringer at his own expense. If he did not do so, American could take action in his name "and for the account of the parties as their interests may appear.” American was authorized to withhold royalties during such proceedings and to apply them to defray the cost of a successful action. Petitioner had no liability for costs in excess of royalties.
Effective in November 1954 petitioner granted a 10-year license under the same patent to Ever-Level Glides, Inc. (hereinafter Ever-Level). Under their agreement, Ever-Level was to pay royalties of 7 percent of the net selling price of glides it sold. However, the royalty was limited to 5 percent until Mason & Parker Manufacturing Co., an alleged infringer, ceased (voluntarily or through legal action by petitioner) to manufacture or sell devices similar to the glides. The additional 2-percent royalty on sales made in the meantime was to be paid once the stated condition was satisfied. Petitioner did not commence any action against Mason & Parker under this agreement and never received the additional 2-percent royalty.
On April 6, 1960, petitioner and Ever-Level executed a "patent royalty agreement” which superseded the 1954 license. The 1960 agreement gave Ever-Level an exclusive license to make, have made, use, and sell glides throughout the United States and Canada for the life of the patents, subject to the American Seating license. Royalties were set at 5 percent of the net selling price of glides sold by Ever-Level. Should annual royalties with respect to sales in fields outside the "restaurant trade” not reach a specified minimum, the license would become nonexclusive with respect to those fields. The restaurant trade was defined as sales "for use in establishments offering food and/or drink to the public.” There was no minimum royalty on sales in the restaurant field. Ever-Level never paid the minimum royalty on non-restaurant sales, and its license became nonexclusive as to such sales in 1963.
The 1960 license provisions regarding suits against alleged infringers were similar to those contained in the American Seating license. In addition, petitioner was obligated to defend infringement suits brought against Ever-Level at his own expense. Any net profit resulting from a suit by Ever-Level against an infringer was to be divided equally between it and petitioner.
Petitioner again agreed that he would "commence and vigorously and in good faith prosecute” an infringement action against Mason & Parker. If that action was unsuccessful, royalties would be reduced by half and, if unfavorable on the merits, Ever-Level had the right to cancel. If petitioner did not commence such an action promptly, Ever-Level could pay royalties into escrow pending the outcome of a suit. In the event of a successful action, petitioner would be entitled to the escrowed royalties plus one-half of the royalties which had previously been withheld under the 1954 agreement.
Ever-Level could cancel the agreement on 60 days’ notice, and petitioner could cancel in the event of default. Both parties’ rights were subject to a binding arbitration provision. The agreement would terminate on bankruptcy or similar event affecting Ever-Level. It was binding on both parties and their successors and could be assigned by either with the consent of the other. If petitioner desired to sell his patents, Ever-Level had a right of first refusal.
Petitioner thereafter attempted unsuccessfully to find a business willing to purchase rights under his patent outside the fields covered by the American Seating and Ever-Level licenses. He was told by those he contacted that it would not be commercially worthwhile to manufacture and sell glides in a market that excluded the public seating and restaurant fields.
Following acrimonious dispute between them, petitioner and Ever-Level canceled all previous agreements on May 1, 1969, and executed a settlement agreement. This agreement granted Ever-Level a royalty-free nonexclusive license limited to the restaurant field. Petitioner agreed to pay certain legal fees, and a promissory note issued by petitioner to an officer of Ever-Level was canceled. Ever-Level assigned to petitioner all rights to recover damages for infringement of petitioner’s patents.
An infringement action by petitioner against Mason & Parker was begun in 1968 and successfully concluded in 1969. As an inducement for Ever-Level to enter into the May 1, 1969, settlement agreement, petitioner released any claim for the additional 2-percent royalty provided in the 1954 agreement. Ever-Level did not reduce, withhold, or pay into escrow any royalties under the 1960 agreement.
Petitioner and Ever-Level sued Bassick Co. and Stewart-Warner Corp. (hereinafter jointly referred to as Stewart-Warner)3 for infringement of the glide patents. On February 23, 1967, the United States District Court for the Northern District of Illinois found the patents infringed. This decision was affirmed by the United States Court of Appeals for the Seventh Circuit on February 28, 1968, and petition for certiorari was denied on October 14, 1968. In December 1968, Stewart-Warner determined that it would have to pay petitioner damages of $43,304 ($36,783 in royalties and $6,521 in interest) and accrued that amount as a liability on its books. Stewart-Warner’s motions to vacate the judgment and for rehearing en banc in the Seventh Circuit were denied on July 8 and September 9, 1969, respectively, and a further petition for certiorari was denied on January 12, 1970. In February 1970 a special master, appointed to determine damages, issued a proposed report. The report stated that the master had reviewed 2300 pages of testimony and depositions and over 200 exhibits. The master found that Stewart-Warner had sold 3,716,470 infringing glides, of which 3,065,856 were in the field covered by Ever-Level’s exclusive license. He found that there was no "established royalty” with respect to the glides but that a "reasonable royalty” would be 7 percent of sales. On that basis, he found that petitioner was entitled to damages of $51,496.76, without interest prior to the filing of the report. He also found Ever-Level was entitled to damages of $131,893 for lost profits. Shortly thereafter, the case was settled by Stewart-Warner’s payment of $171,694.88 to petitioner, to whom Ever-Level’s claim had been assigned in 1969.
During 1969 petitioner also received, under settlement agreements, infringement damages of $5,527.90 from Robert É. Miller & Co., Inc., and $5,000 from United Industrial Syndicate, Inc.
ULTIMATE FINDINGS OF FACT
Upon the grant of the exclusive license to Ever-Level, all substantial rights to petitioner’s glide patent had been transferred.
The amount which petitioner was entitled to receive as infringement damages from Stewart-Warner could not be determined with reasonable accuracy prior to 1970.
OPINION
1. Section 1235
The first question we must decide is whether section 1235 entitles petitioner to long-term capital gain treatment of amounts received with respect to his glide patent.4 Petitioner granted two licenses, one exclusive in the public seating field (the American license) and one exclusive in the restaurant field (the Ever-Level license). He contends that the two licensed fields together covered all significant uses for his invention so that he has made a transfer of all substantial rights therein.
Section 1235 provides for long-term capital gain treatment with respect to "A transfer * * * of property consisting of all substantial rights to a patent * * * by any holder.”5 It applies to an exclusive license to make, use, and sell a patented item in all practical fields. See Fawick v. Commissioner, 436 F.2d 655 (6th Cir. 1971), revg. on other grounds 52 T.C. 104 (1969). Section 1.1235-2(b)(l), Income Tax Regs., among other things, defines "all substantial rights to a patent” to mean "all rights * * * which are of value at the time the rights to the patent * * * are transferred.” Thus, petitioner will fail if we determine that, during the taxable years in question, he retained rights which were "of value.” Accordingly, it is to this factual question that we initially turn our attention.
At least theoretically, it would appear that petitioner retained some rights after the grant of exclusive licenses to American Seating and Ever-Level since those licenses involved only two fields of use.6 However, respondent’s regulations are addressed to the question of the "value” of those rights and, in that context, the courts have sought, in situations involving field-of-use licenses, to determine whether there was an "established value” (United States v. Carruthers, 219 F.2d 21, 25 (9th Cir. 1955); Flanders v. United States, 172 F.Supp. 935, 950 (N.D. Cal. 1959)), "potential value” (Mros v. Commissioner, 493 F.2d 813, 816 (9th Cir. 1974), revg. T.C. Memo. 1971-123), "known value” (Fawick v. Commissioner, supra), "substantial value” (Gruber v. United States, 158 F.Supp. 510, 514 (D. Ore. 1958)), "ascertainable fair market value” (Puschelberg v. United States, 330 F.2d 56, 61 (6th Cir. 1964)), or "value” (Bannister v. United States, 262 F.2d 175, 178 (5th Cir. 1958)). Cf. E. I. du Pont de Nemours & Co. v. United States, 432 F.2d 1052, 1055 (3d Cir. 1970), and Bell Intercontinental Corp. v. United States, 381 F.2d 1004, 1015 (Ct. Cl. 1967), adopting the standards of "substantial value” and "little tangible value,” respectively, in determining whether a transfer of patent rights by a nonholder under section 1235 qualified for capital gain treatment under sections 1221 and 1222.
We see no reason to engage in a semantic exercise to determine which adjective should be affixed to the word "value” in order to determine whether the aforementioned provision of respondent’s regulations has been met. The question to be resolved is one of fact and we are satisfied that petitioner has carried his burden of proof. We base our conclusion on our evaluation of the record as a whole, including the fact that the report of the special master in the infringement action clearly indicates that the only two markets "of any consequence” were the restaurant field and school furniture (public seating).7 In so concluding, we should point out, however, that petitioner did retain rights of value during the period after the grant of the exclusive license to American Seating for the field of public seating but before the grant of the exclusive license to Ever-Level in the restaurant field; the latter license is clear proof of the existence of such value. That period ended well before the taxable years involved herein and therefore we need not concern ourselves with this aspect of the case, except to the extent that the issue of the applicability of section 1235 to field-of-use exclusive licenses is involved — an issue to which we now turn our attention.
Section 1.1235-2(b)(l) of respondent’s regulations, in effect during the taxable years involved herein, specifically provides that "The term 'all substantial rights to a patent’ does not include a grant of rights to a patent * * * Which grants rights to the grantee, in fields of use within trades or industries, which are less than all the rights covered by the patent, which exist and have value at the time of the grant.” In William S. Rouverol, 42 T.C. 186 (1964), we held section 1235 applicable to an exclusive license which contained an industry field-of-use limitation, and in Thomas L. Fawick, 52 T.C. 104 (1969), we held the above-quoted regulation (promulgated after Rouverol was decided) invalid to the extent it was inconsistent with congressional intent as determined by Rouverol. However, our decision in Fawick was reversed by the Sixth Circuit Court of Appeals. Fawick v. Commissioner, supra, specifically rejected our analysis of the legislative history of section 1235 and held the regulation valid.8 See also Mros v. Commissioner, supra; First National Trust & Savings Bank of San Diego v. United States, 200 F.Supp. 274 (S.D. Cal. 1961).
In Fawick, the issue was whether royalties under an exclusive license containing an industry field-of-use limitation qualified for capital gain treatment under section 1235 where the holder retained valuable rights to other uses at the time of the transaction; at a later date, but before the taxable years involved therein, the taxpayer had assigned his rights in the patent (excluding the rights which were subject to the aforementioned license and certain other rights which he reserved) to a corporation solely in exchange for stock. The Sixth Circuit Court of Appeals resolved the issue in respect of the field-of-use exclusive license against the taxpayer. The Fawick decision has since been followed by another Circuit Court of Appeals. See Mros v. Commissioner, supra. We find it unnecessary in this case to decide whether we will abandon or continue to adhere to the position we took in Fawick and Mros. Since an appeal herein will be to the Sixth Circuit Court of Appeals, Jack E. Golsen, 54 T.C. 742 (1970), affd. on the substantive issue 445 F.2d 985 (10th Cir. 1971), requires us to follow the decision of that circuit in Fawick. Accordingly, we hold that petitioner is not entitled to the benefits of section 1235 in respect of the royalties from American Seating during the taxable years in question.
A different problem arises with respect to the Ever-Level royalties and the infringement damages awarded to Ever-Level and assigned to petitioner (see n. 6 supra). We have found that, after the grant of the exclusive license to Ever-Level, the petitioner retained no rights of value. In substance, therefore, that license represented a transfer of all of the rights of petitioner other than the rights under the American Seating license. Respondent contends that section 1235 still does not apply to the Ever-Level license on the ground that that section applies only where there is a single transferee of all substantial rights under a patent. In so contending, respondent points to the second prong of the two-pronged test established by the Sixth Circuit Court of Appeals in Fawick v. Commissioner, 436 F.2d at 662:
If the taxpayer can show that he has no substantial rights in the patent after the transfer, as a second inquiry we must look at what he actually relinquished to the transferee. It is our opinion that the phrase "all substantial rights to a patent” is a reference to the monopoly right for which the patent stands. The monopoly right granted by the patent is the right to exclude others from making, using, or selling the invention. This necessarily encompasses the right to exclude others from any particular industrial field in which those others might choose to use the invention. This is the right that must be sold to the transferee, and the transfer must cover all practical fields-of-use for the invention. [Fn. ref. omitted.]
See also Mros v. Commissioner, 493 F.2d at 816; First National Trust & Savings Bank of San Diego v. United States, 200 F.Supp. at 282.
Since the only issue before the Sixth Circuit Court of Appeals was the initial field-of-use exclusive license, it is clear that the issue in respect of the second license (Ever-Level) involved herein was not specifically considered in Fawick and we therefore do not consider that Jack E. Golsen, supra, binds us to follow the Sixth Circuit’s analysis in this regard. In fact, we disagree. We see no reason why petitioner should not be entitled to the benefits of section 1235 in respect of the Ever-Level license which we have found constituted a transfer of all rights which were of value to him at the time of the transfer. We recognize that section 1235 refers to "A transfer * * * of property consisting of all substantial rights to a patent” (emphasis added) and that this language literally supports respondent’s position. Furthermore, we recognize that the language of respondent’s regulation, which speaks of "all rights (whether or not then held by the grantor) which are of value at the time the rights to the patent * * * are transferred,” is also capable of such an interpretation, although in our opinion this is not necessarily the case. See Bell Intercontinental Corp. v. United States, 381 F.2d at 1015 n.5. On the other hand, both this Court and the Court of Claims have previously indicated substantial reservations about respondent’s position. See Bell Intercontinental Corp. v. United States, 381 F.2d at 1013-1015; Donald C. MacDonald, 55 T.C. 840, 859 (1971). Moreover, the courts have accorded a liberal interpretation to section 1235. See Young v. Commissioner, 269 F.2d 89, 93 (2d Cir. 1959), affg. 29 T.C. 850 (1958); William S. Rouverol, 42 T.C. at 191. Finally, it seems clear to us that a nonholder, who could not claim the benefits of section 1235, could nevertheless report long-term capital gain under sections 1221 and 1222 on such a transfer, and, under these circumstances, we see no reason why section 1235 should be more strictly applied. Bell Intercontinental Corp. v. United States, supra; Donald C. MacDonald, supra. We hold that petitioner is entitled to long-term capital gain benefits under section 1235 in respect of the royalties and infringement damages attributable to the Ever-Level license.9
There are some loose ends. Respondent determined that the infringement damages from Robert E. Miller & Co., Inc., and United Industrial Syndicate, Inc., were ordinary income to petitioner. Since there is nothing in the record to indicate that the infringing sales can be attributed to the Ever-Level license, respondent’s position must be sustained. See sec. 1.1235-l(c), Income Tax Regs. With respect to the damages arising out of Stewart-Warner’s infringement, received by petitioner directly, we think at least a portion thereof cannot be attributed to sales in the restaurant field.10 The special master found that Stewart-Warner sold 3,716,470 infringing glides, of which 3,065,856 (or 82.5 percent) were in that field.11 The gross amounts awarded by the special master were $51,496.76 to Blake and $131,893 to Ever-Level, or an aggregate of $183,389.76. The amount of the settlement determined to be ordinary income in the deficiency notice was $171,694.88. Consequently, we think that only 82.5 percent of 171,694.88/183,389.76 of $51,496.76 should be taxed as long-term capital gain under section 1235 and the balance of the $51,496.76 should be taxed as ordinary income.
2. Infringement Damages
Petitioner and Ever-Level sued Stewart-Warner and a predecessor corporation for infringement of the glide patents. In 1967, the District Court held that there had been an infringement, which holding was affirmed and certiorari denied in 1968. Blake v. Bassick Co., 262 F.Supp. 910 (N.D. Ill. 1967), affd. 392 F.2d 879 (7th Cir. 1968), cert. denied 393 U.S. 828 (1968). Various motions and petitions for certiorari by Stewart-Warner were denied, the last in early 1970 (396 U.S. 1006). Also in 1970, the special master issued his report as to the amount of damages to be awarded and the parties agreed to settle the matter shortly thereafter. Stewart-Warner accrued an amount on its books in 1968 as damages payable to petitioner. Petitioner contends that, following the initial denial of certiorari in 1968, at least the amount so accrued was properly income to him under the accrual method of accounting. Petitioner’s tax liability for 1968 is not before us.
There are two factual conditions precedent to accrual of an item of income. It must appear that all events fixing the right to receive income have occurred and that the amount of income can be determined with reasonable accuracy. Ralph L. Brutsche, 65 T.C. 1034, 1060 (1976); sec. 1.451-1(a), Income Tax Regs.
We see no need to dwell upon the question whether we should ignore, as petitioner would have us do, the various attempts by Stewart-Warner, after 1968, to reopen the issue of the validity of the patent upon which petitioner’s right to recover depended. Even if we assume that such right became fixed upon the initial denial of certiorari in 1968, petitioner cannot prevail. It is apparent from the special master’s report that the basis for determining the amount of petitioner’s recovery (and that of Ever-Level as well) was disputed and clearly not reasonably calculable until that report was issued in 1970.12 Under these circumstances, any accrual prior to that year would not be proper. First Bancredit Corp. v. Flexlume Corp., 10 F.Supp. 1015 (W.D.N.Y. 1934). Cf. United States v. Safety Car Heating & Lighting Co., 297 U.S. 88 (1936); Triplex Safety Glass Co. v. Latchum, 44 F.Supp. 436 (D. Del. 1942), affd. per curiam 131 F.2d 1023 (3d Cir. 1942); W. W. Sly Manufacturing Co., 24 B.T.A. 65 (1931). The cases relied upon by petitioner either are distinguishable or support respondent’s position. In Continental Tie & Lumber Co. v. United States, 286 U.S. 290 (1932), the Supreme Court held that the amount could have been determined with reasonable accuracy during the taxable year in question. In H. Liebes & Co. v. Commissioner, 90 F.2d 932 (9th Cir. 1937), affg. 34 B.T.A. 677 (1936), the Court of Appeals merely held that the amount was not properly accruable in earlier years when the judgment fixing both the right and the amount was fixed but in the taxable year in question when the right of appeal expired or payment was received. In Lark Sales Co. v. Commissioner, 437 F.2d 1067 (7th Cir. 1970), affg. in part and revg. in part Richard L. Medd, T.C. Memo. 1968-244, the Court of Appeals applied the usual test and went on to hold that the right in question was subject to a bona fide dispute. In Boston Elevated Railway Co., 16 T.C. 1084 (1951), affd. on other grounds 196 F.2d 923 (1st Cir. 1952), this Court held that accrual should be deferred where, although the right of receipt was fixed, the amount and the method of computation thereof were being contested. Finally, in Lucas v. American Code Co., 280 U.S. 445 (1930), although the Supreme Court adverted to the fact that a part of the amount in question had been accrued on the corporate books, it held that this represented no more than what a prudent businessman would do with respect to a potential liability and did not justify accrual for tax purposes as long as liability was being contested and the amount of damages was unpredictable; the Court’s analysis disposes of petitioner’s contention to the extent that it is based on the fact that Stewart-Warner entered an accrual in favor of petitioner on its books in 1968.
3. Surrender of Royalty Rights
In connection with the 1969 settlement agreement with Ever-Level, petitioner abandoned any claim for royalties under the 1954 license agreement which were unpaid due to his failure to bring suit against Mason & Parker Manufacturing Co. Petitioner alleges that such royalties — totaling $6,836.78 — were properly accrued and reported on his tax returns while the 1954 agreement was in force13 and that he is entitled to an offsetting deduction in 1969 to reflect surrender of his claim to them. Petitioner has wholly failed to establish any legal or factual basis for the asserted deduction.
Initially, we observe that petitioner’s attempt to shift the burden of proof on this issue to respondent is unavailing. While the matter may have been raised orally before the Service during the administrative process, that fact has no more effect on the burden of proof than if it had been raised in his original return. Petitioner first formally raised his present contention in an amended partnership return filed after the notice of deficiency was issued and renewed it in his petition. There are no circumstances which would justify our disregarding the general rule placing the burden of proof on petitioner. Rule 142, Tax Court Rules of Practice and Procedure.
The record does not support the contention that the additional royalties in question were properly accruable at any time prior to 1969. Their payment was wholly contingent on success in infringement litigation against Mason & Parker, which success did not occur until that year. Thus, any deduction which might be allowable as a result of other events occurring in 1969 could do no more than offset an equivalent, currently accruable income item. Further, petitioner had already surrendered his right to half the amounts under consideration in the 1960 Ever-Level agreement. Finally, he has not proved that he suffered any loss by relinquishing the balance of his claim. Numerous elements of consideration passed between petitioner and Ever-Level by virtue of the 1969 settlement, only one of which was the assignment to petitioner of Ever-Level’s claim against Stewart-Warner. That claim had a value far in excess of the allegedly canceled royalties, as subsequent events demonstrated.
Petitioner’s alternative position, that the amount forgiven should be treated as a cost of acquiring Ever-Level’s claim and set off against the recovery received in 1970, must also be rejected. He has not shown any method by which the various items of consideration passing to Ever-Level in connection with the 1969 settlement could be allocated among the benefits he received. Those benefits included the cancellation of personal indebtedness and the termination of Ever-Level’s exclusive license. It is impossible for us to determine what portion, if any, of the canceled royalties should be treated as a cost properly applied against the 1970 recovery. Cf. Battle Creek Food Co. v. Commissioner, 181 F.2d 537 (6th Cir. 1950), affg. 8 T.C.M. 207 (1949). We hold for respondent on this ground as well.
Decision will be entered under Rule 155.
Reviewed by the Court.
Quealy, J., dissents.