Harmel v. Commissioner of Internal Revenue, Docket No. 38855.

• Citation: 19 BTA 376
• Decision Date: 24 March 1930
• Docket Number: Docket No. 38855.
• Parties: HENRY HARMEL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

19 B.T.A. 376 (1930)

HENRY HARMEL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 38855.

Board of Tax Appeals.

Promulgated March 24, 1930.

Robert Ash, Esq., for the petitioner.

J. Arthur Adams, Esq., for the respondent.

The respondent, by deficiency letter dated April 4, 1928, asserted deficiencies in tax against the petitioner in the amounts of $2,587.24 for 1924 and $367.68 for 1926, and determined an overassessment in the amount of $727.78 for the year 1925. It is alleged in the petition that the petitioner's tax liability for the three years mentioned is in controversy. At the hearing counsel for the petitioner abandoned the proceeding in so far as it involves the year 1926, and as to the year 1925 the proceeding was dismissed for lack of jurisdiction on the part of the Board to hear and determine it.

FINDINGS OF FACT.

The petitioner is an individual residing at Megargel, Tex. In the year 1924 the petitioner was, and had been for many years, the owner in fee simple of certain lands. In October, 1924, he executed two oil and gas leases covering said land on the basis of stipulated royalties and a cash consideration of $57,000.

In December, 1924, the petitioner's funds in the First State Bank of Megargel, Tex., became depleted and he, or his agent, on December 5, 1924, deposited in said bank to the account of the petitioner a check for $1,000 drawn on the First National Bank of Wichita Falls. On December 24, 1924, the petitioner or his agent deposited in said First State Bank of Megargel to the account of the petitioner a check for $500 drawn on the First National Bank of Wichita Falls. The said checks drawn on the First National Bank of Wichita Falls were against deposits made by the petitioner from the consideration received on the execution of the oil and gas leases mentioned.

The petitioner filed an income-tax return for 1924 and treated said amount of $57,000 as capital gain. The respondent, upon audit of the return, determined that said $57,000 was income taxable at the ordinary rates and he also added to the petitioner's income the said amount of $1,500 deposited in the First State Bank of Megargel as "unidentified deposits not reported," and determined a deficiency in tax for 1924 in the amount of $2,587.24.

OPINION.

MARQUETTE:

It is clear that the respondent is in error with respect to the amount of $1,500 deposited by the petitioner in the First State Bank of Megargel, Tex., in December, 1924. These deposits were funds transferred from the bank of Wichita Falls to the bank of Megargel, and represented a part of the $57,000 received by the petitioner on the execution of certain oil and gas leases, which had already been included in the petitioner's income. The amount in question should be eliminated from the petitioner's income for 1924 as heretofore determined by the respondent.

The only other question is whether the cash consideration received by the petitioner in 1924 as a part of the consideration for the execution of certain oil and gas leases should be taxed as ordinary income or as capital gain, under the provisions of section 208 of the Revenue Act of 1924. This question has been considered by the Board on a number of occasions and has been exhaustively discussed in Henry L. Berg et al., 6 B. T. A. 1287; John T. Burkett, 7 B. T. A. 560; and James R. Parkey et al., 16 B....