114 T.C. No. 15
UNITED STATES TAX COURT
CHARLES E. AND SHERRIE R. STRANGE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8602-98. Filed March 29, 2000.
Ps paid State nonresident income tax to nine
States on net royalty income derived from their
interests in oil and gas wells located within those
States. Ps reported all their royalty income on
Schedules E, Supplemental Income and Loss, which they
attached to their Federal income tax returns. In
calculating their total net royalty income, petitioners
deducted the State income taxes they paid.
Consequently, petitioners deducted the State
nonresident income taxes in computing their adjusted
gross income for the years at issue.
Held, the addition of sec. 164(a)(3), I.R.C., by
the Revenue Act of 1964, Pub. L. 88-272, sec. 207(a),
78 Stat. 19, 40, did not change the existing law with
respect to the deduction of State income taxes.
Held, further, State nonresident income taxes are
not "attributable" to property held for the production
of royalties and, therefore, are not deductible under
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