Porter Royalty Pool, Inc. v. Commissioner

1. Prior to the taxable year, certain land owners entered into oil and gas leases with various oil companies, reserving to themselves a one-eighth royalty interest in the oil produced. Subsequently a pooling agreement was devised whereby, in 1933, one-half of the royalty interest of each land owner was transferred to the petitioner in exchange for shares of stock in a number based on the number of acres pooled. In addition, the promoters of the pool received 25 per cent of the petitioner's stock. Under the pooling agreement, the royalties paid on the interests thus pooled were to be collected…