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Lee Ranch mine land.9 In addition, unlike the overriding royalty
interests in Crichton, Peabody’s supply contract payment rights
do not necessarily last until coal on the Lee Ranch mine land has
been exhausted. Without optional renewals, the TEPCO supply
contract lasts until December 31, 2009, and the WEF supply
contract lasts until December 31, 2004. See, e.g., Clemente v.
Commissioner, T.C. Memo. 1985-367, where exchanged properties
were held not to be like kind because the gravel extraction right
the taxpayer received did not give that taxpayer the right to an
unlimited quantity of gravel. By contrast, in Rev. Rul. 55-749,
1955-2 C.B. 295, the exchange of fee land for perpetual water
rights was ruled to be qualified as like kind.10
9In his declaration, the Lee Ranch mine’s controller stated
that, to the best of his knowledge, all coal ever supplied under
the TEPCO and WEF supply contracts has come from the Lee Ranch
mine. In certain limited and/or remote circumstances, each
contract would permit the seller to furnish substitute coal from
a source other than the Lee Ranch mine. For instance, the seller
under the TEPCO contract commits to use its best efforts to mine
and supply to TEPCO such coal as is needed for operation of the
Springerville Station from the Lee Ranch mine’s coal reserves.
The TEPCO contract, however, provides that from “time to time”,
the seller may substitute coal from other mines owned by the
seller so long as the substituted coal delivered satisfies
prescribed quality requirements and does not cost more than coal
then being delivered to the Springerville Station from the Lee
Ranch mine. Similarly, during an event of force majeure, the WEF
supply contract would permit the seller, with the buyer’s
consent, to deliver substitute coal (i.e., coal obtained from a
source other than the Lee Ranch mine) to the Escalante Station.
10In Rev. Rul. 55-749, 1955-2 C.B. 295, 296, the rationale
for the ruling included the following:
(continued...)
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