Umsted v. Commissioner

¶1concurring: While I am in accord with the result reached in these proceedings, for the reasons more fully Lizzie Glide, 27 B.T.A. 1264, I disagree with the opinion in so far as it intimates that an allowance for depletion might have been deducted had evidence been presented showing that production in the near future was reasonably anticipated. The instant proceedings, like the Glide case, are controlled by the Revenue Act of 1926, which substitutes for the “ reasonable allowance for depletion ” to be determined under the Commissioner’s regulations, which was the subject of consideration by the Supreme Court in Murphy Oil Co. v. Burnet, 287 U.S. 299, a depletion allowance at the flat rate of 27% per centum of income from the property. It is no longer necessary to determine what, upon a unit basis, may be a reasonable allowance. The statute allows the flat rate, reasonable or not. If it be true, as we held in the Glide case, that depletion is inseparably related to production, that unless there is a well, there can be no allowance for depletion, then it is immaterial that at the time the bonuses were received subsequent production was anticipated. Unless production is obtained within the same taxable period in which the bonuses are received, they can not be offset by the deduction of an allowance for depletion. In my opinion, the plain wording of the statute can not be stretched to permit an allowance for depletion in the absence of an existing well, nor should a similar effort be made with respect to the language used by'the court in determining a case arising upon a different set of facts and under different statutory provisions. Doubtless, inequities may arise under this strict rule. It may be that in some cases bonuses may be received which must be treated as income and which can not be reduced by an allowance for depletion because no production was obtained within that year. The task of supplying a remedy for such harsh results lies with the Congress, not with this Board and the courts.