Louisiana Land & Exploration Co. v. United States

Littleton, Judge,

delivered the opinion of the court:

The material facts in this case are substantially the same as the facts involved in Kirby Petroleum Company v. Commissioner of Internal Revenue, and Commissioner of Internal Revenue v. Anna Vickers Crawford, 326 U. S. 599, decided January 28,1946. Both of these cases involved the right of taxpayers to depletion on a percentage of the net profits of the operating lessees. The Supreme Court held, at the conclusion of its opinion, as follows:

* * *. The facts of each transaction must be appraised to determine whether the transferor has made an absolute sale or has retained an economic interest — a capital investment.

In our view, the “net profit” payments in these cases flow directly from the taxpayers’ economic interest in the oil and partake of the quality of rent rather than of a sale price. Therefore, the capital investment of the lessors is reduced by the extraction of the oil and the lessors should have depletion.

Under the facts and the above decision, plaintiff is entitled to recover and judgment will be entered in its favor for thirty-thousand, ninety-two dollars, and eighteen cents’ ($30,092.18), with interest as provided by law. It is so ordered.

JoNes, Judge; Whitaker, Jkidge; and Whaley, Chief Justice, concur. MaddeN, Judge, took no part in the decision of this case.