L. W. Brooks, Jr. And Jane R. Brooks v. Commissioner of Internal Revenue

DYER, Circuit Judge.

In this appeal by the taxpayers 1 from the decision of the Tax Court, the transactions involved are as simple as ABC 2 but the tax consequences are not. The Tax Court held that the taxpayers, having purchased oil and gas working interests burdened by retained production payments, were required to capitalize, as additional costs of acquiring the properties, the expenses incurred by them al-locable to the lifting of the oil accruing to the production payment. 3 We disagree and reverse.

In an ABC transaction the taxpayers, as independent oil and gas operators, each acquired a…