¶1dissenting: In an arm’s-length transaction each petitioner agreed to the total cost of the working interest of each lease in which he purchased a fractional interest and the total cost for drilling on each lease. The parties agree that the amount stated in each agreement to represent the total cost of the working interest is the fair market value of such interest. The respondent determined that the amount stated as the drilling costs on each lease was in excess of the fair market value for drilling of the well. The majority opinion holds that petitioners have failed to overcome the presumption of correctness of respondent’s determination. In my view the showing made by each petitioner that the amount of the drilling cost for each well was arrived at by arm’s-length negotiation with Barnwell is evidence sufficient to overcome the presumption of correctness attaching to this determination in respondent's notice of deficiency. I therefore disagree with the basis of the opinion of the majority.
¶2The evidence shows that Barnwell did not pay an amount of the total agreed cost of drilling a well on each lease proportionate to its participation interest in that lease. It may be that the evidence is not sufficient to show that the amount of deduction for drilling costs disallowed by respondent to each petitioner is in excess of the amount paid by that petitioner for the “carried” interest of Barnwell and on this basis the result reached by the majority is correct. See Erwin H. Haass, 55 T.C. 43 (1910). However, it is not clear from the facts set forth by the majority whether respondent’s disallowance could be fully sustained on this basis.
¶3dissenting: To the extent the majority herein relies on the determination that petitioners have failed to meet their burden of proof, I respectfully disagree. Receipt into evidence of the contract setting out the drilling costs is sufficient to meet petitioners’ initial burden of proof. In the posture of this case, the burden of going forward then shifts to respondent, and absent some positive showing that the agreement is out of step with reality it should be respected and in my view warrants the conclusion that petitioners have met their burden.
¶4DkeNNEN, FoeResteR, and Hoyt, JJ., agree with this dissent.