Edwards Drilling Co. v. Commissioner
United States Board of Tax Appeals
1. The petitioner drilled oil wells for others for specified amounts payable out of the proceeds derived from the sale of a proportion of the first oil produced and saved from the property.
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1. The petitioner drilled oil wells for others for specified amounts payable out of the proceeds derived from the sale of a proportion of the first oil produced and saved from the property. The rights thus acquired to future income are contingent and the fair market value thereof is not accruable as taxable income. 2. The drilling of the wells did not result in the acquisition of a capital asset by the petitioner and costs incurred by it in completing the wells are deductible as ordinary and necessary business expenses.
1Opinion of the Court
*344OPINION.
Disney :
Involved in the issue raised by the petitioner is the question of whether petitioner’s tax liability should be determined on the cash or accrual basis of accounting. The petitioner claims it regularly employed the cash basis of accounting, not the accrual method, as determined by the respondent.
As part of its system of accounting, the petitioner maintained accounts designated notes receivable, accounts receivable, and others generally found in books kept according to the accrual method. It consistently entered expense items in its books as they were incurred, and all of such…
2Cases cited7 opinions
- United States v. AndersonSupreme Court of the United States · 1926
- North American Oil Consolidated v. BurnetSupreme Court of the United States · 1932
- Lucas v. American Code Co.Supreme Court of the United States · 1930
- Burnet v. LoganSupreme Court of the United States · 1931
- United States v. Dakota-Montana Oil Co.Supreme Court of the United States · 1933
2 more not listed; retrieve them via the Exa API.
3Cited by21 opinions
- Commissioner of Int. Rev. v. Rowan Drilling Co.Court of Appeals for the Fifth Circuit · 1942
- Boudreau v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1943
- Dearing v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1939
- Scott McCormac and May McCormac v. The United StatesUnited States Court of Claims · 1970
- Commissioner of Internal Revenue v. Edwards Drilling Co.Court of Appeals for the Fifth Circuit · 1938
16 more not listed; retrieve them via the Exa API.