Day v. Commissioner
United States Tax Court
Petitioners received lump-sum cash payments in consideration of their executing agreements conveying, for a period of 25 years renewable for an additional 20 years, the rights to all of the water underlying their lands. The aquifer containing the water is not subject to recharge, and the purchaser could, and intended to, extract all the water.
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Petitioners received lump-sum cash payments in consideration of their executing agreements conveying, for a period of 25 years renewable for an additional 20 years, the rights to all of the water underlying their lands. The aquifer containing the water is not subject to recharge, and the purchaser could, and intended to, extract all the water. Held, petitioners did not retain an economic interest in the water in place, the agreements effected sales rather than leases, and the consideration received by petitioners is taxable as capital gain rather than ordinary income.
1Opinion of the Court
OPINION
The parties are in general agreement that the principles developed in the field of oil and gas taxation govern the resolution of the issue presented for decision — whether the lump-sum payments received by petitioners on the execution of their contracts with Pan American are taxable as capital gains or as ordinary income. Defining those principles is not nearly as difficult as applying them to the present facts. One reason, aside from the difficulties inherent in the problem, is that some of the features of the agreements involved herein are foreign to the form of customary oil and gas…
2Cases cited29 opinions
- Burnet v. HarmelSupreme Court of the United States · 1932
- Corn Products Refining Co. v. CommissionerSupreme Court of the United States · 1956
- Palmer v. BenderSupreme Court of the United States · 1932
- Commissioner v. P. G. Lake, Inc.Supreme Court of the United States · 1958
- United States v. MillerSupreme Court of the United States · 1939
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3Cited by24 opinions
- Pleasanton Gravel Co. v. CommissionerUnited States Tax Court · 1975
- Earl Vest and Fay Vest, Petitioners-Appellees-Cross v. Commissioner of Internal Revenue, Respondent-Appellant-CrossCourt of Appeals for the Fifth Circuit · 1973
- Vest v. CommissionerUnited States Tax Court · 1971
- William T. Gladden Nicole L. Gladden v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 2001
- Victory Sand & Concrete, Inc. v. CommissionerUnited States Tax Court · 1974
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