Perkins v. Thomas, 4843.
| Decision Date | 11 June 1936 |
| Docket Number | No. 4843.,4843. |
| Citation | 15 F. Supp. 356 |
| Parties | PERKINS et al. v. THOMAS, Collector of Internal Revenue. |
| Court | U.S. District Court — Northern District of Texas |
Harry C. Weeks, of Wichita Falls, Tex., for plaintiffs.
J. L. Backstrom, Sp. Atty., Bureau of Internal Revenue, of Dallas, Tex., and Frank B. Potter, Asst. U.S. Atty., of Fort Worth, Tex., for defendant.
J. J. Perkins and wife sue to recover certain income taxes for the year 1933. The first recovery is sought on payments made on what is known as the Ozier ranch deal. There were approximately 5400 acres of land purchased by the plaintiff, for $10,000. He claims that it was bought because of its mineral value, and that the surface was practically valueless. By 1933 he had transferred all of his mineral interests, so that from that source he had realized approximately $45 per acre. In 1936 he sold the surface for $3.75 per acre. The testimony supports his contention that the venture was attractive because of potential mineral value. Gas and oil were being discovered and were being produced in close proximity. The surface of the land was so rough that it had little value for even ranch purposes. When a transaction in respect to which a loss is claimed is closed and completed by some identifiable event, then such loss is deductible. Generally this occurs when the property is sold or otherwise disposed of. Coalinga-Mohawk Oil Co. v. Commissioner (C.C.A.) 64 F.(2d) 262. But when a property is of mineral nature and purchased because of that attraction, the bookkeeping need not await the final disposition of the fee provided the testimony is sufficient to show the completion of the mineral transaction. In this case the profits from the mineral part of the land, which motivated the deal, were clearly ascertainable in the year 1933, and the taxpayer was not bounden to wait until the year 1936, when he sold the surface right in order to have a recoupment for his capital investment.
The testimony further shows that a figure of three-quarters for the mineral and one-quarter for the surface is quite generous on the part of the plaintiff.
The second transaction centers around the purchase of oil and gas leases in Gregg county in 1929. $105,000 in cash were paid, a note for $50,000 was given, which has since been settled, and $395,000 more were to be paid out of the oil produced and saved. The contract of sale had these provisions:
"Now, therefore, in consideration of the sum of ten dollars ($10.00) cash in hand paid by Faith Oil Corporation, a Texas corporation, and of the further sum of Three Hundred Ninety-five Thousand Dollars ($395,000.00) to be paid out of the oil produced and saved from the hereinafter described lands, and to be one fourth of all the oil produced and saved from the premises hereinafter described until the full sum of three hundred ninety five thousand dollars ($395,000.00) is paid, we, the said Mamie S. Hammonds, joined by her husband, O. O. Hammonds, and Fred P. Branson, all of Oklahoma City, Oklahoma County, Oklahoma, the present owners of said leases hereinafter described and all rights thereunder and incident thereto, do hereby bargain, sell, transfer, assign and convey all our right, title and interest in and to said leases and rights thereunder, hereinafter described, except the five acres specially excepted therefrom, to Faith Oil Corporation, its successors and assigns, to wit:"
There follows a detailed description of the oil and gas leases and lands covered thereby which are not material to the question involved. The instrument further provided as follows:
At the time of the making of the leases to the plaintiffs, there were no producing wells. Now, there are 22 on the Burnett, 8 on the Fuller and 8 on the Fenton. Approximately one-half of the $395,000 oil payment had been paid up to March 13, 1936, and the balance will probably be paid within two and a half years, if production continues.
There is another tract in Upshur county, which was to be paid for by $45,000 in oil, but because of the court's view with reference to the case, it need not concern us.
The plaintiffs were required to include as a part of their income, the amount which they derived from the operation of the oil properties, and which they paid to their assignors under the assignment above quoted. They sue for such amounts. They were allowed depletion.
A case almost directly in point against the plaintiffs' contention is Comar Oil Company v. Burnet, 64 F.(2d) 965 (C.C.A. Eighth Circuit). In that case Palmer v. Bender, 287 U.S....
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Thomas v. Perkins 1937
...tax they paid for 1933 on their community income. In respect of the amount now in controversy, that court gave judgment for defendant (15 F.Supp. 356); the Circuit Court of Appeals reversed (86 F.(2d) 954) and, its decision being in apparent conflict with that of the Circuit Court of Appeal......