TAXATION-INCOME TAX-DEPLETION-LESSOR'S SHARE IN NET INCOME AS SUBJECT TO DEPLETION

Taxpayer which owned certain lands leased the same to companies for production of oil and other minerals for a cash bonus, a royalty in the usual form, and an agreement that lessor should receive a percentage of the net money profits realized by the lessees from their operation under the lease. Lessor claimed a right to deduct depletion allowance from the receipts which were a percentage of the net income arising from operating the properties. Held, lessor had a right to depletion deduction in respect to the percentage of net income because it had an "economic interest" in the oil in place. Kirby Petroleum Co. v. Commissioner of Internal Revenue and Commissioner of Internal Revenue v. Crawford, (U.S. 1946) 66 S.Ct.

409.