Dearing v. Commissioner
United States Board of Tax Appeals
1. Where a partnership in which petitioners were interested drilled oil and gas wells for others and took its compensation in future oil payments the fair market value of the oil payment contracts is not taxable as income. 2. Under such contracts the partnership obtained an economic interest in the oil in place and was entitled to the statutory percentage depletion on such payments.
1Opinion of the Court
*847OPINION.
Hill:
Our first question is the correctness of the respondent’s action in including in gross income the fair market value of the oil payment contracts.
We had this same question before us in the recent case of Edwards Drilling Co., 35 B. T. A. 341, where we held that the fair market value of future oil payment contracts is not accruable as taxable income. We said in part:
In E. F. Simms, 28 B. T. A. 988, rights under oil leases were sold for cash and notes, together with a right to 400,000 barrels of oil produced from the property, if the land produced such an amount, and an overriding…
2Cases cited3 opinions
- Palmer v. BenderSupreme Court of the United States · 1932
- Burnet v. LoganSupreme Court of the United States · 1931
- Thomas v. PerkinsSupreme Court of the United States · 1937
3Cited by12 opinions
- Commissioner of Int. Rev. v. Rowan Drilling Co.Court of Appeals for the Fifth Circuit · 1942
- Suhr v. CommissionerCourt of Appeals for the Sixth Circuit · 1942
- Boudreau v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1943
- Eastern Coal Corporation v. YokeDistrict Court, N.D. West Virginia · 1946
- Boudreau v. CommissionerUnited States Board of Tax Appeals · 1941
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