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above, if the transaction did not involve an economic
interest in the mineral in place, then the owner of the
mineral would not necessarily derive ordinary income in the
year of the transaction in the amount of the consideration
paid for the interest, but would continue to be taxed on
the income derived from the mineral property without regard
to the transaction. Christie v. United States, 436 F.2d
1216 (5th Cir. 1971).
Contrary to petitioners' argument, we find no basis
to conclude that Congress intended to apply section 636
"in all cases without regard to whether the 'purchaser'
acquired an interest in the minerals which would constitute
an 'economic interest' within the traditional meaning of
the term." We conclude that Congress intended section
636 to apply only when the production payment qualifies as
an economic interest in the mineral in place. Accordingly,
we reject petitioners' argument that section 1.636-3(a)(1),
Income Tax Regs., is not consistent with the congressional
purpose in enacting section 636 because it limits the
definition of the term "production payment" to a right to
production which is "an economic interest in such mineral
in place".
The principal question presented by petitioners'
motion for summary judgment is whether, under general tax
principles, Arkla's payment is an advance payment for gas
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