J. S. Abercrombie Co. v. Commissioner

OPINION.

ARUNdell, Judge:

The theory underlying respondent’s treatment of the “carried working interest” is that Atlatl and Coronado transferred to Harrison and petitioner all their interests in the oil and gas leases, that they retained nothing more than a right to share in net profits, and that therefore they had no economic interest in oil and gas in place. In that we think respondent is in error.

From the agreement and the assignment it is clear that Atlatl and Coronado reserved a one-sixteenth interest, a capital investment, in the minerals. The formal assignment was expressly made “subject…