Court Opinion

ID: 6888400
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:35:15.11225+00
Date Added: 2024-06-11T16:05:46.827953
License: Public Domain

PHILLIPS, Circuit Judge
(dissenting in part).
It is my opinion that there was a sale of the equipment and that W. G. Choate and his co-owners retained no interest therein. If this be true, then W. G. Choate was entitled to deduct the depreciated cost of the equipment if it was sold for an amount in excess thereof, or one hundred per cent of the loss if it was sold for an amount less than the depreciated cost. While it is not expressly stated, I conclude from paragraphs 7 and 9 of the agreed statement of facts that the equipment was held for less than eighteen months. Accordingly, it becomes unnecessary to allocate the sale price as between lease and equipment. The mathematical result is the same, whether you deduct the depreciated cost of the equipment from the entire sale price or allocate a portion of the sale price to equipment, deduct the depreciated cost, and determine the gain or loss accordingly. I am unable to see how, under the provisions for depletion of oil and gas wells, a taxpayer can ever recover either his depreciated cost or his capital loss resulting from the sale of equipment. Oil and gas depletion is based not on cost but on a per centum of gross income. See 26 U.S.C.A. Int.Rev.Code, §§ 23(m) and 114(b) (3). It would in no wise be increased by reason of depreciation of the equipment. Accordingly, I am of the opinion that the decision of the Tax Court should be affirmed in its entirety. This view is supported by Hogan v. Commissioner, 5 Cir., 141 F.2d 92.