Court Opinion

ID: 4477643
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:38.760405+00
Date Added: 2024-06-11T15:03:30.105777
License: Public Domain

LeMere, J., dissenting: I am unable to distinguish the instant proceeding in principle from Burnet v. Harmel, 287 U. S. 103; Palmer v. Bender, 287 U. S. 551; Bankers Pocahontas Good Co. v. Burnet, 287 U. S. 308; Otis A. Kittle, 21 T. C. 79, affirmed per curiam 229 F. 2d 313; Arthur S. Barker, 24 T. C. 1160, on appeal C. A. 2; Crowell Land & Mineral Corporation, 25 T. C. 223, on appeal C. A. 5. I interpret those cases to hold that where any part of the consideration for the transfer of mining rights is based on production, an economic interest is retained and the payments received constitute ordinary income. The record shows that the parties were at considerable variance as to the probable commercial ore content of the lands in which petitioner held mining rights. The negotiations leading up to the execution of the contract indicate that petitioner was willing to either sell or lease on a basis of 1,224,286 tons, and that Sheffield preferred a mining lease based on its estimate of 800,000 tons. Based on a unit price of 25 cents per ton, the difference in the total consideration to be paid would amount to $100,000, or one-third more than the payment of $200,000 which petitioner received in the taxable year involved. The reservation in the agreement was to protect petitioner in the event more than 800,000 tons were mined, and in my opinion requires the contract to be construed as a leasing arrangement. The contract provides for a consideration of $1 and other good and valuable consideration. The ultimate amount of consideration to be received by petitioner can be ascertained only on the basis of production. In a sale all the absolute and unqualified rights pass. If strings are attached, something other than a sale emerges. The fact that the advance payment was large bears on the hardship involved but does not furnish a legal basis for altering the determinative principle of law to be applied. Therefore, I respectfully dissent from the conclusion reached in the majority opinion.