Owen J. Roberts

“ The pertinent sections of the Revenue Act of 1926 are 214 (a) (9) granting a reasonable deduction for depletion in the case of oil and gas wells, and 204 (c) (2) permitting computation of the allowance at 27 1/2 per centum of the gross income from the property. [3]
A bonus is not proceeds from the sale of property, but payment in advance for oil and gas to be extracted, and is therefore taxable income. [4] As such it is a part of the 'gross income from the property' as the phrase is used in section 204 (c) (2) to designate the base for the application of the percentage deduction. ”

“ No oil being produced when the bonus was received, but property became productive within the taxable year.
' (3) No oil being produced when the bonus was received, and not more than a speculative prospect of future oil production at that time, but property is now known to have become productive after the taxable year.
' (4) Property has never become productive.' and held that depletion should be allowed in situations (1) and (2) and denied in situations (3) and (4) . ”

“ When the instruments were executed there was no oil well within three and a half miles of the demised land. The lessors had no right to compel the drilling of wells and none were put down during 1926. ”