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from the Lee Ranch mine land and its supply contracts payment
rights for the coal cannot be separated from its ownership of the
Lee Ranch mine coal reserves. Those rights are part of the
bundle of rights incident to Peabody’s ownership of the Lee Ranch
mine land coal reserves. Indeed, those supply contracts give
Peabody no right to mine and extract coal from that land.
Instead, Peabody’s right to mine and extract coal from that land
comes solely from its ownership of that land and coal reserves.
As to the right to payment under the contracts for coal
furnished, those rights are ancillary to Peabody’s ownership of
the coal reserves. Accordingly, the question of whether the
supply contracts afford an advantageous or detrimental coal price
to Peabody is immaterial in that setting. See Koch v.
Commissioner, 71 T.C. at 68. Because we hold that the right to
receive income from the tenant is part of the bundle of rights
ancillary to and inherent in the ownership of the realty, the
question of whether the lease was advantageous or detrimental to
the fee owner is immaterial.
It is true Peabody is obligated to mine and supply coal to
meet the operating needs of power stations and that Peabody is
prohibited from impairing the contracted-for supply by selling
coal to other buyers. In our view those contract obligations and
restrictions constitute a distinction in the grade or quality of
the old and new mining properties rather than a difference in
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