Wing v. Commissioner
United States Tax Court
P owned a one-third interest in a coal mining joint venture which had made a valid election under sec. 761(a), I.R.C. 1954. P reported his income from the venture on the accrual method. On Oct. 20, 1977, P entered into a 10-year sublease agreement for the extraction of coal, whereby the joint venture would pay a "minimum royalty" of $ 6,000 per year for the life of the sublease. The "minimum royalty" was recoupable out of production from the reserves.
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P owned a one-third interest in a coal mining joint venture which had made a valid election under sec. 761(a), I.R.C. 1954. P reported his income from the venture on the accrual method. On Oct. 20, 1977, P entered into a 10-year sublease agreement for the extraction of coal, whereby the joint venture would pay a "minimum royalty" of $ 6,000 per year for the life of the sublease. The "minimum royalty" was recoupable out of production from the reserves. The $ 60,000 representing the total "minimum royalties" owing during the lease term was purportedly paid immediately in the form of $ 10,000…
1Opinion of the Court
OPINION
Dawson, Chief Judge:
Respondent determined a deficiency in petitioner’s Federal income tax in the amount of $25,888 for the taxable year ended December 31,1977.
The issues presented for decision are: (1) Whether the amendment to section 1.612-3(b)(3), Income Tax Regs., by the T.D. 7523 is valid; and (2) if so^ whether any portion of the $60,000 amount paid1 by petitioner in the form of cash plus a nonrecourse promissory note meets the requirements of the regulation and is deductible in the year paid or accrued.
Facts
This case was submitted fully stipulated pursuant to Rule 122, Tax Court…
2Cases cited54 opinions
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3Cited by93 opinions
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