WALKER, Circuit Judge.
During the year 1926 the petitioner and his wife each owned a 50 per cent, interest in the partnership of C. T. Herring & Son, and they filed separate income tax returns for that year under the community property laws of the state of Texas. In 1926 the partnership owned several ranches in the vicinity of Amarillo, Tex., and its principal business was cattle raising. During that year it leased, for a period of five years, portions of its ranches to sundry individuals and corporations “for the sole and only purpose of mining and operating for oil and gas, and laying pipe lines, and building tanks, power stations and structures thereon to produce, save and take care of said products.” Under those leases the partnership received as cash bonuses therefor a total of $683,793.75. No oil development had been begun on any of the leased land at the dates of the leases, and at those dates there was no oil well within 3% miles of the leased land. During the year 1926, there was no oil production on the leased land. No wells were sunk on the leased land until the year 1930, during which four wells were sunk, with the result that gas and oil were produced. In the partnership return for the year 1926 a depletion deduction was taken in the amount of $188,-[786]*786043.28, being 27% per cent, of the total amount of bonus receipts. In his income tax return for that year the petitioner deducted from the amount of his gross income one-half of the amount of the above-mentioned ' deduction taken in the partnership return. This deduction was disallowed by the respondent, with the result that petitioner’s distributive share of the partnership net income was increased, and a deficiency of $11,-337.29 was determined. The Board of Tax Appeals sustained that action of the respondent. The action of that tribunal is complained of by petition for review.
The question presented is whether the petitioner was entitled to deduct from his 1926 gross income the whole or a part of the amount of the deduction claimed by him on account of depletion. The following are the governing statutory provisions: “In computing net income there shall be allowed as deductions: * • * A reasonable allowance for the exhaustion * * * of property used in the trade or business. * * * In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each ease,” etc. Section 214 (a) (8) (9), Revenue Act 1926, 44 Stat. 26, 26 USCA § 955 (a) (8) (9). “See. 204. (e) The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the same as is provided in subdivision (a) or (b) for the purpose of determining the gain or loss upon the sale or other disposition of such property, except that— * ' * *
“(2) In the case of oil and gas wells the allowance for depletion shall be 27% per centum of the gross income from the property during the taxable year. Such allowance shall not exceed 50 per centum of the net income of the taxpayer (computed without allowance for depletion) from the property, except that in- no case shall the depletion allowance be less than it would be if computed without reference to this paragraph.” Revenue Act of 1926, 44 Stat. 9, 14, 26 USCA § 935 (c) (2).
For support of the contention of the petitioner much reliance is placed on the decision in the case of Murphy Oil Co. v. Burnet, 287 U. S. 299, 53 S. Ct. 161, 77 L. Ed. 318, to the effect that where the execution of an oil and gas lease is followed by the production of oil, a depletion allowance must be made in respect to a bonus paid to the lessor. The report of that decision contains no statement as to whether oil was or was not extracted from the leased land during the taxable years in question, 1919 and 1920. But from the report of the decision which was affirmed in that ease it appears that the leased land produced oil in each of those years. Murphy Oil Co. v. Burnet (C. C. A.) 55 F.(2d) 17. The court which rendered the decision which was affirmed by the Supreme Court expressly ruled that the depletion allowable to the lessor in an oil lease was limited to actual depletion during the taxable years in question. The decision of the Supreme Court in that ease does not support a contention that a deduction for depletion with respect to a bonus payment is allowable to a taxpayer who, during the taxable year in question, received that bonus upon his executing an oil and gas lease covering land which during that year contained no oil or gas well, but in which several years later were sunk wells which produced oil and gas. We think it cannot reasonably be said that the provision allowing, “in the ease of * * * oil and gas wells,” a deduction from gross income for depletion discloses an intention to authorize the allowance of such a deduction from a taxpayer’s gross income in a year in which he had no interest in any then existing oil or gas well, but during which he received a bonus upon his execution of an oil and gas lease covering land which had never been explored for oil or gas by sinking a well or starting to sink one, but in which several years later were sunk wells which produced oil or gas. The deductions from gross income authorized by an above-cited statute are based upon happenings or facts existing during the taxable year in question which are regarded as having the effect of offsetting to some extent the taxpayer’s gains or profits realized or accrued during that year, and may involve some return of the taxpayer’s capital investment. In the case of Lynch v. Alworth-Stephens Co., 267 U. S. 364, 45 S. Ct. 274, 275, 69 L. Ed. 660, the court construed and applied the provisions of the Income Tax Law of September 6, 1916, as to * deductions based on exhaustion or depletion of mines. The following are extracts from the opinion in that ease: “In the case of mines, a specific kind of property, the exhaustion is described as depletion, and is limited to an amount not exceeding the market value in the mine of the product mined and sold during the year. The interest of respondent under its leases in the mines being property, its right to deduct a reasonable allowance for exhaustion of such property, if there be any, during the [787]*787taxable year results from tbe plain terms of the statute, such deduction, since the property is an interest in mines, to be limited to the amount of the exhaustion of respondent’s interest caused by the depletion of the mines during the taxable year. We agree with the Circuit Court of Appeals (294 F. 194) that: ‘The plain, clear, and reasonable meaning of the statute seems to be that the reasonable allowance for depletion in case of a mine is to be made to every one whose property right and interest therein has been depleted by the extraction and disposition of the product thereof which has been mined and sold during the year for which the return and computation are made.’ * * * The deduction for depletion in the case of mines is a special application of the general rule of the statute allowing a deduction for exhaustion of property.” As to the measurement or determination of the amount of allowable depletion deduction, the statute applicable in the instant case is different from the one which was construed and applied in the cited ease.
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WALKER, Circuit Judge.
During the year 1926 the petitioner and his wife each owned a 50 per cent, interest in the partnership of C. T. Herring & Son, and they filed separate income tax returns for that year under the community property laws of the state of Texas. In 1926 the partnership owned several ranches in the vicinity of Amarillo, Tex., and its principal business was cattle raising. During that year it leased, for a period of five years, portions of its ranches to sundry individuals and corporations “for the sole and only purpose of mining and operating for oil and gas, and laying pipe lines, and building tanks, power stations and structures thereon to produce, save and take care of said products.” Under those leases the partnership received as cash bonuses therefor a total of $683,793.75. No oil development had been begun on any of the leased land at the dates of the leases, and at those dates there was no oil well within 3% miles of the leased land. During the year 1926, there was no oil production on the leased land. No wells were sunk on the leased land until the year 1930, during which four wells were sunk, with the result that gas and oil were produced. In the partnership return for the year 1926 a depletion deduction was taken in the amount of $188,-[786]*786043.28, being 27% per cent, of the total amount of bonus receipts. In his income tax return for that year the petitioner deducted from the amount of his gross income one-half of the amount of the above-mentioned ' deduction taken in the partnership return. This deduction was disallowed by the respondent, with the result that petitioner’s distributive share of the partnership net income was increased, and a deficiency of $11,-337.29 was determined. The Board of Tax Appeals sustained that action of the respondent. The action of that tribunal is complained of by petition for review.
The question presented is whether the petitioner was entitled to deduct from his 1926 gross income the whole or a part of the amount of the deduction claimed by him on account of depletion. The following are the governing statutory provisions: “In computing net income there shall be allowed as deductions: * • * A reasonable allowance for the exhaustion * * * of property used in the trade or business. * * * In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each ease,” etc. Section 214 (a) (8) (9), Revenue Act 1926, 44 Stat. 26, 26 USCA § 955 (a) (8) (9). “See. 204. (e) The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the same as is provided in subdivision (a) or (b) for the purpose of determining the gain or loss upon the sale or other disposition of such property, except that— * ' * *
“(2) In the case of oil and gas wells the allowance for depletion shall be 27% per centum of the gross income from the property during the taxable year. Such allowance shall not exceed 50 per centum of the net income of the taxpayer (computed without allowance for depletion) from the property, except that in- no case shall the depletion allowance be less than it would be if computed without reference to this paragraph.” Revenue Act of 1926, 44 Stat. 9, 14, 26 USCA § 935 (c) (2).
For support of the contention of the petitioner much reliance is placed on the decision in the case of Murphy Oil Co. v. Burnet, 287 U. S. 299, 53 S. Ct. 161, 77 L. Ed. 318, to the effect that where the execution of an oil and gas lease is followed by the production of oil, a depletion allowance must be made in respect to a bonus paid to the lessor. The report of that decision contains no statement as to whether oil was or was not extracted from the leased land during the taxable years in question, 1919 and 1920. But from the report of the decision which was affirmed in that ease it appears that the leased land produced oil in each of those years. Murphy Oil Co. v. Burnet (C. C. A.) 55 F.(2d) 17. The court which rendered the decision which was affirmed by the Supreme Court expressly ruled that the depletion allowable to the lessor in an oil lease was limited to actual depletion during the taxable years in question. The decision of the Supreme Court in that ease does not support a contention that a deduction for depletion with respect to a bonus payment is allowable to a taxpayer who, during the taxable year in question, received that bonus upon his executing an oil and gas lease covering land which during that year contained no oil or gas well, but in which several years later were sunk wells which produced oil and gas. We think it cannot reasonably be said that the provision allowing, “in the ease of * * * oil and gas wells,” a deduction from gross income for depletion discloses an intention to authorize the allowance of such a deduction from a taxpayer’s gross income in a year in which he had no interest in any then existing oil or gas well, but during which he received a bonus upon his execution of an oil and gas lease covering land which had never been explored for oil or gas by sinking a well or starting to sink one, but in which several years later were sunk wells which produced oil or gas. The deductions from gross income authorized by an above-cited statute are based upon happenings or facts existing during the taxable year in question which are regarded as having the effect of offsetting to some extent the taxpayer’s gains or profits realized or accrued during that year, and may involve some return of the taxpayer’s capital investment. In the case of Lynch v. Alworth-Stephens Co., 267 U. S. 364, 45 S. Ct. 274, 275, 69 L. Ed. 660, the court construed and applied the provisions of the Income Tax Law of September 6, 1916, as to * deductions based on exhaustion or depletion of mines. The following are extracts from the opinion in that ease: “In the case of mines, a specific kind of property, the exhaustion is described as depletion, and is limited to an amount not exceeding the market value in the mine of the product mined and sold during the year. The interest of respondent under its leases in the mines being property, its right to deduct a reasonable allowance for exhaustion of such property, if there be any, during the [787]*787taxable year results from tbe plain terms of the statute, such deduction, since the property is an interest in mines, to be limited to the amount of the exhaustion of respondent’s interest caused by the depletion of the mines during the taxable year. We agree with the Circuit Court of Appeals (294 F. 194) that: ‘The plain, clear, and reasonable meaning of the statute seems to be that the reasonable allowance for depletion in case of a mine is to be made to every one whose property right and interest therein has been depleted by the extraction and disposition of the product thereof which has been mined and sold during the year for which the return and computation are made.’ * * * The deduction for depletion in the case of mines is a special application of the general rule of the statute allowing a deduction for exhaustion of property.” As to the measurement or determination of the amount of allowable depletion deduction, the statute applicable in the instant case is different from the one which was construed and applied in the cited ease. But the statute applicable in the instant ease, we think not less clearly than the one which was construed and applied in the cited case, discloses a legislative intention to allow a deduction for depletion only when depletion occurs during the taxable year in question. In the ease of Burnet v. Thompson Oil & G. Co., 283 U. S. 301, 51 S. Ct. 418, 420, 75 L. Ed. 1049, a taxpayer claimed that it was entitled to ■ a deduction from gross income for depletion which would represent not only that year’s sustained depletion, but make up for sustained but disallowed depletion in earlier years. In rejecting that claim the court said: “The tax is an income tax for 1918, and in the absence of express provision to the contrary, it is not to be supposed that the taxpayer is authorized to deduct from that year’s income, depreciation, depletion, business losses or other similar items attributable to other years. The very fact that Congress denied deductions equal to the sustained depletion in the earlier years negatives an intent that they should be allowed in later years, as if for depletion then sustained. The construction adopted by the court below in effect results in including in the ta'xable year items referable to other years, and is contrary to the theory of a tax for specific years.
“The nature of the tax as .one for annual periods has been repeatedly mentioned in dealing with its application in various situations. The taxable year 1918, and that only, is involved, and deductions applicable to that year only should be allowed.”
Petitioner claimed that in the computation of his income tax liability for the year 1926 he was entitled to a depletion deduction from his gross income with respeet to the amount of bonuses he received in that year, though in that year there was no depletion or reduction of the oil or gas in place in the land covered by the leases on which the bonus payments were made. It was suggested in argument that, by reason of petitioner’s receipt in that year of the large sum in bonuses, depletion allowances made in that year probably would be more beneficial to petitioner than such allowances made in later years were likely to be. It was not claimed that the applicable statute providing for depletion allowances “in the ease of oil and gas wells,” or any regulation under that statute, contains anything indicating an intention to change the rule that a depletion reduction from gross income in a taxable year in question must be based on depletion which occurred in that year.
We summarize: Petitioner claimed in effect that, without showing that any depletion occurred in the year 1926, he was entitled to a depletion deduction from his gross income for that year. The bonuses he received in 1926 constituted income of petitioner in that year. Burnet v. Harmel, 287 U. S. 103, 53 S. Ct. 74, 77 L. Ed. 199. The burden was on him to show that he was entitled to the deduction claimed. Brown v. Helvering, 54 S. Ct. 356, 78 L. Ed. -, January 15, 1934. The depletion charge permitted as a deduction from gross income in determining taxable income “in the case of oil and gas wells” represents the reduction, during the taxable year in question, of oil or gas in place in land in which the taxpayer has an interest. Helvering v. Falk, 54 S. Ct. 353, 78 L. Ed. -, January 15, 1934; United States v. Ludey, 274 U. S. 295, 302, 47 S. Ct. 608, 71 L. Ed. 1054. No statutory provision which has come to our notice authorizes such a deduction to be based on an expectation, however well founded, that oil or gas remaining in place in land during the taxable year in question will be extracted in subsequent years. Depletion of oil or gas is a result of the production and sale thereof. Palmer v. Bender, 287 U. S. 551, 558, 53 S. Ct. 225, 77 L. Ed. 489. Instead of the applicable statute specifically allowing, “in the case of oil and gas wells,” a depletion deduction from gross income in a taxable year in which no depletion of oil or gas is shown [788]*788to have occurred, the language of that statute indicates the absence of any intention of the lawmakers to depart from the established rule that a depletion deduction from gross income for a taxable year is allowable only when depletion occurred in that year.
The deduction claimed by petitioner, not being authorized specifically by the applicable statute or any regulation thereunder, was properly disallowed. Burnet v. Thompson Oil & G. Co., supra; Brown v. Helvering, supra.
The petition for review is denied.