Roger Muldavin, et al. - Page 3

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          the possible exception, according to petitioners, of                        
          jurisdictional matters, is whether petitioners are entitled to an           
          oil depletion allowance in excess of 15 percent of their reported           
          royalty income.                                                             
               Petitioners are husband and wife.  They resided in Arcadia,            
          Michigan, at the time the petitions herein were filed.  They                
          filed their Federal income tax returns at the Covington,                    
          Kentucky, Service Center.                                                   
               Prior to petitioners' marriage, Jean Muldavin (Mrs.                    
          Muldavin) owned in fee simple a piece of property in Manistee               
          County, Michigan (the property).  On June 19, 1968, she entered             
          into an oil and gas lease with J. L. Orr, whereby Orr as lessee             
          had the exclusive right to produce oil on the property in                   
          exchange for which:                                                         
                    The lessee shall deliver to the credit of the                     
               lessor as royalty, free of cost, in the pipe line to                   
               which lessee may connect its wells the equal one-eighth                
               part of all oil produced and saved from the leased                     
               premises, or at the lessee's option, may pay to the                    
               lessor for such one-eighth royalty the market price for                
               oil of like grade and gravity prevailing on the day                    
               such oil is run into the pipe line, or into storage                    
          Subsequent to petitioners' marriage, Mrs. Muldavin transferred              
          her interest in the property to Roger and Jean Muldavin as                  
          husband and wife.  At some point, Shell Oil Company (Shell)                 
          became the successor in interest of J. L. Orr.  On June 26, 1975,           

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