Anderson v. Helvering
In Anderson v. Helvering, 310 U.S. 404, 60 S.Ct. 952, 84 L.Ed. 1277 (1940), the vendor, Oklahoma Company, sold the taxpayer certain oil interests for $50,000 cash and $110,000 to be paid from 'one-half of the proceeds derived from the oil and gas produced from the properties and from the sale of fee title to any or all of the land conveyed.' (Id. 405-406, 60 S.Ct. at 953.)
The taxpayer paid the Oklahoma Company one-half of the lease proceeds as they were earned. The issue was whether the taxpayer should have included these funds as well as his own share of the proceeds in his taxable income.
In holding that the taxpayer should have included one hundred percent of the lease proceeds in his taxable income the court said:
'It is settled that the same basic issue determines both to whom income derived from the production of oil and gas is taxable and to whom a deduction for depletion is allowable. That issue is, who has a capital investment in the oil and gas in place and what is the extent of his interest (cases cited).' (Id. at 407, 60 S.Ct. at 954.)