Court Opinion

ID: 4481891
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:10.669726+00
Date Added: 2024-06-11T15:03:37.801167
License: Public Domain

TaNNENWald, J., concurring: I concur in the result reached by the majority. It is obvious from the arithmetic that a portion of the excess payment involved herein was to cover the operator’s share of the drilling cost. Such amount is clearly not deductible. In addition, the operators in this case were also the persons who put the deal together. It is conceded that they expected to make a profit but there is no evidence as to whether this profit was attributable to services in making the drilling arrangements or to the brokerage services. G. F. Hedges, Jr., 41 T.C. 695 (1964), is distinguishable on several grounds. In the first place, taxpayer in that case made no payment to cover any portion of the operator’s share of the drilling costs. In the second place, the amount of the payment allocable to the drilling costs was separately negotiated which is not the situation herein where only the total amount paid was the subject of negotiation. Finally, in Hedges, the only issue 'before the Court was whether the excess payment should be allocated to the working interest or to the drilling costs; no argument was presented that an allocation of a portion of the payment should be made to any other element, which is the issue before us in this case. Simpson, Irwin, and Sterrett //., agree with this concurring opinion.