Choate v. Commissioner

In 1936 Choate and Hogan, a partnership of which the petitioner was a member, acquired an oil and gas lease. They drilled six producing wells on the leased land and operated the property until August 1938. At that time they sold to Sylva Oil Co. for a cash consideration of $110,-000 all their right, title and interest in the lease “together with all wells and the equipment thereof, including pumps, casing, piping, tanks, lease house, and all other personal property on or used in connection” with the premises. But they expressly reserved to themselves “1/8 of the 8/8ths of all oil and gas and…