Brea Canon Oil Co. v. Commissioner
United States Board of Tax Appeals
The petitioner is the owner of oil and gas properties and converts casing head gas produced therefrom into commercial gasoline in its own plant.
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The petitioner is the owner of oil and gas properties and converts casing head gas produced therefrom into commercial gasoline in its own plant. Held, that the casing head gas is a raw material used in manufacturing operations and that only the fair market value thereof at the mouth of the well is an element in the computation of gross income from the property for the purpose of determining depletion deduction under the provisions of section 204(c)(2) of the Revenue Act of 1926.
1Opinion of the Court
OPINION.
Lansdon:
The respondent has determined deficiencies for the years 1926, 1927, 1928, 1929, and 1930 in the respective amounts of $7,294.79, $12,688.46, $7,890.69, $5,084.49, and $6,945.08, or a total of $39,906.51. Two issues are pleaded in the amended petition: (1) whether depletion is allowable at the rate of 27½ percent on the total gross income realized from the sale of gasoline extracted from casing head gas produced by the petitioner from its *1135own wells, and (2) the correct depreciation deduction on account of wear and tear of physical assets owned by the petitioner and used in its…
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