Reich v. Commissioner
United States Tax Court
The petitioners participated in ventures to drill for and exploit geothermal steam. One of these ventures was successful and the resulting wells produced sufficient steam to supply electrical generating plants. One of the petitioners claimed percentage depletion against the gross income it received from steam production in the successful venture. All the petitioners expensed the intangible costs of drilling and developing geothermal steam wells.
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The petitioners participated in ventures to drill for and exploit geothermal steam. One of these ventures was successful and the resulting wells produced sufficient steam to supply electrical generating plants. One of the petitioners claimed percentage depletion against the gross income it received from steam production in the successful venture. All the petitioners expensed the intangible costs of drilling and developing geothermal steam wells. Held, the petitioner which participated in the successful venture is entitled to deduct percentage depletion at the rate of 27 1/2 percent against…
1Opinion of the Court
OPINION
The first issue is whether Thermal is entitled, pursuant to section 613,5 to deduct percentage depletion at the rate of 27½ percent against gross income received from geothermal steam wells at The Geysers. To resolve the issue, we must first decide three factual questions.
The first question is whether the commercial product of the wells at The Geysers is steam or heat. Eespondent’s position — which he characterizes as his primary stance in the case — is that the commercial product of the wells is the internal heat of the earth. It follows, respondent contends, that the product of the…
2Cases cited3 opinions
- Commissioner of Internal Revenue v. Quartzite Stone CompanyCourt of Appeals for the Tenth Circuit · 1959
- Quartzite Stone Co. v. CommissionerUnited States Tax Court · 1958
- Blue Ridge Stone Corporation v. United StatesDistrict Court, W.D. Virginia · 1959
3Cited by15 opinions
- United States v. Union Oil Company of CaliforniaCourt of Appeals for the Ninth Circuit · 1977
- County of Sonoma v. State Board of EqualizationCalifornia Court of Appeal · 1987
- Arthur E. Reich v. Commissioner of Internal Revenue, George D. Rowan v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1972
- Geothermal Kinetics, Inc. v. Union Oil Co.California Court of Appeal · 1977
- Pariani v. State of CaliforniaCalifornia Court of Appeal · 1980
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