Robert J. Nicolazzi and Judith M. Nicolazzi v. Commissioner of Internal Revenue

The taxpayers appeal from a decision of the United States Tax Court denying them a loss deduction pursuant to Internal Revenue Code § 165(a) for a service fee paid to Melbourne Concept, Inc. for the acquisition of federal oil and gas leases in 1976. The Federal Bureau of Land Management sells non-competitive oil and gas leases on public lands through two programs, one involving a lottery and the other over-the-counter sales of open parcels. Melbourne Concept, Inc. offered to the taxpayers an opportunity to participate in its “Program A” under which taxpayers paid a service fee of $10,-075 in…