Roger Muldavin, et al. - Page 11

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          a gross income from the property which excludes amounts received            
          for transportation or refining, etc.  Petitioners do not fall               
          within the category of an integrated producer.  See Exxon Corp.             
          and Subsidiaries v. United States, 88 F.3d 968, 970 (Fed. Cir.              
          1996); Exxon Corp. v. Commissioner, supra, and cases discussed              
               Another of petitioners' arguments is that their lease                  
          agreement with Shell provides that petitioners should receive               
          their royalty income "free of cost", which petitioners construe             
          to mean that Shell should bear the liability for all taxes                  
          related to the lease, including those imposed on them.  This                
          argument fails because, whatever the scope of the phrase "free of           
          cost", the agreement of one party to pay the other's taxes is not           
          binding on respondent and does not alter liability for such taxes           
          under the Code.  Pesch v. Commissioner, 78 T.C. 100, 129 (1982);            
          Neeman v. Commissioner, 13 T.C. 397, 399 (1949), affd. 200 F.2d             
          560 (2d Cir. 1952); Humbert v. Commissioner, 24 B.T.A. 828, 829             
               Petitioners seek to share Shell's status as an integrated              
          oil producer in order to be able to utilize a "market price"                
          measurement for percentage depletion allowance but without regard           
          to the fact that an integrated producer was not entitled to                 
          percentage depletion during the taxable years before us under               
          section 613A (effective for taxable years commencing after                  

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