Estate of Fred F. Lucas, Deceased, Dorothy C. Lucas, and Dorothy C. Lucas, and Shawnee Coal Company, Inc. v. Commissioner of Internal Revenue

ORDER

Petitioners appeal a judgment of the United States Tax Court which is reported at 71 T.C. 838 (1979). The Tax Court held that the petitioners failed to rebut the presumption of correctness attached to the Commissioner’s determination that the 25 cents per ton “step-up” in the sublessee’s “royalty payments” to Lucas constituted an indirect dividend to Lucas from Shawnee. The amount derived therefrom was held to be taxable to Lucas as dividend income not capital gains, and not deductible by Shawnee as part of its cost of goods sold. The individual petitioners and Shawnee have appealed the…