Court Opinion

ID: 9640569
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:08:34.769825+00
Date Added: 2024-06-11T18:10:30.726403
License: Public Domain

SIBLEY, Circuit Judge
(dissenting).
In Santee Club v. White, 1 Cir., 87 F.2d 5, a portion of the club’s property not usable for club purposes was sold off at a profit, but the club was operated as before. In Koon Kreek Klub v. Thomas, 5 Cir., 108 F.2d 616, an oil lease was made for a bonus paid, but no oil well was ever drilled or operated. Here the club made a lease covering the whole of the club’s lands, and in addition to a bonus, is receiving large sums continuously from oil payments and royalties, directly from the operation of oil wells on its golf courses. Receipts from this source in the tax year, and each year since have about doubled the club’s income. Whatever the local view under Texas law, under the federal tax laws what is received from oil payments is not mere purchase money for oil sold, but is the enjoyment of the mineral right in the land, for the exhaustion of which a depletion allowance is to be had. Dearing v. Commissioner, 5 Cir., 102 F.2d 91. This is even more clearly true of royalties. This club has elected thus to use its properties in addition to the ordinary club uses. It is operating for oil, as well as for golf. That it does not pump the wells itself is immaterial. It shares continuously in what the wells produce. So long as this goes on, I think it is not a club “ * * * operated exclusively for pleasure, recreation, and other nonprofitcuble purposes.”