Roger Muldavin, et al. - Page 12

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          December 31, 1974) and without any corresponding adjustment to              
          the amount includable in their gross income.  We are not prepared           
          to accept petitioners' pick-and-choose approach.  Exxon Corp. and           
          Subsidiaries v. United States, 88 F.3d supra, upon which                    
          petitioners rely in respect of the "market price" issue, dealt              
          with the taxable year 19745 and with natural gas subject to a               
          fixed contract, which continued to be entitled to percentage                
          depletion under section 613A.  Such being the case and taking               
          into account the circumstances of the case before us, we find it            
          unnecessary to direct our attention to the seeming conflict in              
          rationale between Exxon Corp. and Subsidiaries v. United States,            
          88 F.3d supra, and Exxon Corp. v. Commissioner, 102 T.C. supra,             
          in respect of an allowance for depletion in excess of actual                
          receipts under section 1.613-3(a), Income Tax Regs.                         
          Additionally, we note that the failure to adjust the amount                 
          includable in gross income has been considered a significant                
          element to be taken into account in respect of the attempt by               
          taxpayers to increase the amount to which the depletion                     
          percentage should be applied.  See Exxon Corp. v. Commissioner,             
          102 T.C. at 735-737.                                                        
               Petitioners' gross income from the property for purposes of            
          the depletion allowance is their royalty income in the amount               

          5  The taxable year 1974 is a year prior to the statutory                   
          amendments which eliminated the allowance of percentage depletion           
          to integrated oil producers.                                                

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