- 12 -
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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