- 32 -
received from the sale of such oil, if, as and when
produced." Commissioner v. P.G. Lake, Inc., supra at 261
n.1 (quoting Anderson v. Helvering, supra at 410). To
qualify as a "production payment" or "oil payment", it was
necessary for the right to consist of an economic interest
in the mineral in place, as opposed to merely the right to
cash payments. See Anderson v. Helvering, supra at 409-
411; Thomas v. Perkins, supra. This is the same
requirement that must be met in order to be eligible to
deduct an allowance for depletion. See Anderson v.
Helvering, supra at 407.
If the transaction involved a right to cash payments,
as opposed to an economic interest in the mineral in place,
then the tax consequences of the transaction differed from
those summarized above. In that case, the consideration
received by the owner of the mineral property constituted a
loan or something other than ordinary income. See Lehigh
Portland Cement Co. v. United States, 433 F. Supp. 639
(E.D. Pa. 1977), affd. without published opinion 577 F.2d
727 (3d Cir. 1978). Additionally, the amounts utilized to
make the cash payments during the payout period were
includable in the owner's income and not in the income of
the payee. See, e.g., Anderson v. Helvering, supra at 413;
Holbrook v. Commissioner, 450 F.2d 134, 137 (5th Cir.
1971), revg. 54 T.C. 1617 (1970); Christie v. United
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