Herbel v. Commissioner
United States Tax Court
M, a subch. S corporation, purchased working interests in various gas wells that were subject to a gas purchase contract with A. To avoid litigation over a so-called take or pay provision in the contract, M and A entered into a Settlement Agreement under which A paid $ 1,850,000 to M in 1988 but reserved the right to recoup the payment from future gas purchases under the contract.
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M, a subch. S corporation, purchased working interests in various gas wells that were subject to a gas purchase contract with A. To avoid litigation over a so-called take or pay provision in the contract, M and A entered into a Settlement Agreement under which A paid $ 1,850,000 to M in 1988 but reserved the right to recoup the payment from future gas purchases under the contract. The Settlement Agreement further provided that M would pay any unrecouped amount to A in cash in the event that it terminated the contract or the wells became substantially depleted. M did not report the payment as…
1Opinion of the Court
OPINION
Whalen, Judge:
These consolidated cases are before the Court to decide petitioners’ motion for summary judgment. The issue presented by petitioners’ motion is whether a payment received in settlement of a contractual dispute involving a so-called take or pay contract for the purchase and sale of natural gas is includable in petitioners’ income in the year received, as respondent contends, or whether the payment is a deposit in the nature of a loan, as petitioners contend. In addition to petitioners’ motion for summary judgment and memorandum in support thereof, respondent’s notice of…
2Cases cited27 opinions
- Commissioner v. Glenshaw Glass Co.Supreme Court of the United States · 1955
- Commissioner v. P. G. Lake, Inc.Supreme Court of the United States · 1958
- Tyler v. United StatesSupreme Court of the United States · 1930
- Anderson v. HelveringSupreme Court of the United States · 1940
- Thomas v. PerkinsSupreme Court of the United States · 1937
22 more not listed; retrieve them via the Exa API.
3Cited by5 opinions
- Karns Prime & Fancy Food, Ltd. v. Comm'rUnited States Tax Court · 2005
- Hovhannissian v. CommissionerUnited States Tax Court · 1997
- Straight v. CommissionerUnited States Tax Court · 1997
- Herbel v. CommissionerUnited States Tax Court · 1996
- Stephen R. and Mary K. Herbel v. CommissionerUnited States Tax Court · 1996