Taxpayers are nonresidents of California.
They received oil royalties from an oil company to which they had given an option to purchase certain federal oil and gas leases on California property. Advice has been requested as to whether the payments to the taxpayer constitute income from a source within this state and are constitutionally taxable. According to Fed. The taxability of the royalties to nonresidents depend therefore on the nature of the ownership which produced them. The more recent cases which have considered the problem have held that if the lease is for a term of years and as long thereafter as oil and gas are produced, the interest acquired is a profit a prende in gross, which is a freehold interest in real property.