Huntington Beach Company v. United States

MADDEN, Judge.

The plaintiff owned land near the seashore in California. It granted to Southwest Exploration Company the right to-come on its land and drill wells slantwise to reach oil deposits which were beneath the adjoining submerged lands owned by the State. As compensation, Southwest agreed to pay the plaintiff 17.75% of Southwest’s net profits from the sale of the oil taken from the wells. During the *719year 1948 the plaintiff received large sums of money from Southwest under this arrangement. It claimed, but the Commissioner of Internal Revenue denied to it, the right to a depletion…