- 26 -
citing section 1.451-1(a), Income Tax Regs., argues that
Malibu is required under that method of accounting to
include the payment in income in the year of receipt.
Respondent acknowledges that section 1.451-5(g), Income Tax
Regs., provides an exception to the general rule in section
1.451-1(a), Income Tax Regs., for certain advance payments
treated as mortgage loans pursuant to section 636(a).
However, respondent argues that the subject payment is not
eligible for the exception for two reasons. First, it is
not an “advance payment”, as defined by section 1.451-5(a),
Income Tax Regs., because Malibu is not a taxpayer using an
accrual method of accounting as required by that provision.
Second, it is not a “production payment” for purposes of
section 636(a) because "recoupment by Arkla can occur by
gas deliveries or by a cash repayment (but not by cash
payments from the sale of the minerals), the payment from
Malibu fails to satisfy the Treas. Reg. � 1.636-3(a)
criteria".
Finally, respondent asserts that "there are genuine
issues as to material facts", and that summary judgment is
not proper. See Rule 121. All Rule references are to the
Tax Court Rules of Practice and Procedure. In support of
that position, respondent relies on two affidavits attached
to respondent’s objection, one by an employee of Arkla's
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011