Sneed v. Commissioner

Fifth Circuit

Sneed v. Commissioner

121 F.2d 725, 27 A.F.T.R. (P-H) 737, 1941 U.S. App. LEXIS 4590

CourtCourt of Appeals for the Fifth Circuit

DecidedJuly 17, 1941

DocketNo. 9560

StatusPublished

Cited by5 cases

This text of 121 F.2d 725 (Sneed v. Commissioner) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Sneed v. Commissioner, 121 F.2d 725, 27 A.F.T.R. (P-H) 737, 1941 U.S. App. LEXIS 4590 (5th Cir. 1941).

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Opinion

SIBLEY, Circuit Judge.

The motion for rehearing goes largely upon a misapprehension of our opinion. The restoration to income in 1936 is not made because it then became certain “that the areas in question would never produce gas.” It was because it then became certain that there would be no production under the leases for which the bonuses had been received. The whole question • turns about the bonuses and whether they really represent any depletion, and not about a possible productivity of the lands.

The actual depletion of gas under these lands through wells drilled under other leases is compensated by the depletion allowances made at those wells. There would be a double allowance if it were also allowed here.

The bonuses in question are, it is argued, “income from the property” under the statute whether in 1926 or 1936. But in 1936 they did not, as was assumed in 1926, represent any depletion. The statute, Sec. 204(c) (2), 26 U.S.C.A. Int.Rev.Acts, page 154, in fixing the percentage depletion begins : “In the case of oil and gas wells the allowance for depletion shall be 27% per centum,” etc. If throughout the term of the lease there be no producing oil or gas well, and a fortiori if there be no well at all on the property, this provision does not apply. Equally under the general provision for “a reasonable allowance for depletion”, Sec. 214(9), 26 U.S.C.A. Int.Rev. Acts, page 167, it is unreasonable to permit an allowance for depletion when no well is ever opened.

The motion for rehearing is denied.

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SIBLEY, Circuit Judge.

The motion for rehearing goes largely upon a misapprehension of our opinion. The restoration to income in 1936 is not made because it then became certain “that the areas in question would never produce gas.” It was because it then became certain that there would be no production under the leases for which the bonuses had been received. The whole question • turns about the bonuses and whether they really represent any depletion, and not about a possible productivity of the lands.

The actual depletion of gas under these lands through wells drilled under other leases is compensated by the depletion allowances made at those wells. There would be a double allowance if it were also allowed here.

The bonuses in question are, it is argued, “income from the property” under the statute whether in 1926 or 1936. But in 1936 they did not, as was assumed in 1926, represent any depletion. The statute, Sec. 204(c) (2), 26 U.S.C.A. Int.Rev.Acts, page 154, in fixing the percentage depletion begins : “In the case of oil and gas wells the allowance for depletion shall be 27% per centum,” etc. If throughout the term of the lease there be no producing oil or gas well, and a fortiori if there be no well at all on the property, this provision does not apply. Equally under the general provision for “a reasonable allowance for depletion”, Sec. 214(9), 26 U.S.C.A. Int.Rev. Acts, page 167, it is unreasonable to permit an allowance for depletion when no well is ever opened.

The motion for rehearing is denied.

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121 F.2d 725, 27 A.F.T.R. (P-H) 737, 1941 U.S. App. LEXIS 4590, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sneed-v-commissioner-ca5-1941.

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