*713OPINION.
Korner:The taxpayer contends, (1) that when he purchased the lands in fee there was a known market value in the vicinity for the sale of oil and gas leases of $1 per acre, and that he should be allowed to allocate his cost of purchase between the value of the land and the value of his privilege to lease the land for oil and gas exploration and exploitation; (2) that the leases executed by him constituted a horizontal severance of the premises and were a conveyance in fee of the oil and gas in place beneath the surface at a definitely ascertained selling price, and (3) that from such definitely ascertained selling price he is entitled to deduct, as cost, the value allocated by him to the oil and gas leasing privileges pertaining to the land when he purchased it.
No evidence was introduced to throw light on the circumstances surrounding the purchase of this land by the taxpayer. It was merely stated that he purchased the land in fee. The purchase price was not evidenced. The taxpayer states his position on the first point as follows: “For example, if I paid $10 per acre for this land, I paid $10 for the land with the knowledge that the land was worth but $9 per acre and that the additional $1 per acre was for the value of the prospective oil and gas rights appertaining thereto and a part thereof.” He then introduced in evidence a deposition tending to show that in 1912 some 4,348 acres of this land had been leased by its then owner for oil and gas exploration for $5,000. Two witnesses testified by deposition that, in their opinion, based on knowledge of oil-lease values in that vicinity, the land in question had a lease value for oil and gas purposes of $1 per acre at the time it was purchased by the taxpayer.
Does this evidence establish the right of the taxpayer to segrega! e items of value in his purchase price of a fee simple title to land, and to allocate them as claimed by this taxpayer? In our opinion, it does not. A fee simple title is the highest estate in land contemplated by the law. In such a title all lesser estates, rights, titles, and interests merge. When all such interests so merge there is a complete solidification of title and the various interests going to constitute that title lose their identity and are no longer distinguishable. In thus dealing with interests and estates in property, we are *714faced with an entirely different situation from that where a property has physically divisible values. For example, a man might buy a lot with a building thereon and assign a portion of the value to the land and another to the building. But, having procured a fee title to the whole premises, he could not assign one value to his freehold and another to his 'privilege of renting or even selling the building, because the valuation of the freehold would necessarily include within itself the valuation of the privilege growing out of such ownership. So, in the instant case, the freehold estate comprehended every right and .privilege appertaining to the land. A right or privilege growing out of such ownership is not susceptible of a separate valuation. It will be noted that the value sought to be allocated here as cost is not a value of the oil and gas in place but a value of the owner’s right to lease the land for exploration.
The taxpayer argues that the leases executed by him constitute a severance and sale of the oil and gas in place and the estate created by such leases in the lessee is a determinable fee, and hence that a portion of his purchase price of the freehold should be allocable to the cost to him of such a determinable fee. An examination of the Texas authorities on this point leaves doubt as to the exact status of the estate conveyed by such leases. The Court of Civil Appeals of Texas, in the case of Jones v. Murphy, 253 S. W. 634 (decided May 16,1923; rehearing denied June 13,1923), held that the ordinary oil and gas lease is not, strictly speaking, a lease at all; that it conveys no interest in the land and gives the lessee only an option to drilx and extricate the minerals if found; that under an oil and gas lease for a term of five years but providing that if no well is drilled by a stated date the lease should terminate as to both parties, unless the lessee should pay a stated sum as a rental for 12 months from that date, and that the down payment therein mentioned covered not only the privilege granted until the first rental became payable but also lessee’s option, and that the sum fixed as rental should be paid each year during the period of the lease. The amount to be paid was not, strictly speaking, a rental, but simply a sum, by the payment of which the lessee acquired the right to extend his option, and the lessee was not required to make payment thereof if he elected not to extend his option.
The Court of Civil Appeals of Texas (March, 1920), in Hitson et ux. v. Gilman et al., 220 S. W. 140, at page 143, held that leases similar to those here under consideration confer on the lessee, not an estate in land, but only a lease or option to enter upon the land described in the lease and develop it for oil and other minerals.
The Supreme Court of Texas on June 30,1923, in Stephens County et al. v. Mid-Kansas Oil & Gas Co., 254 S. W. 290, held that leases similar to those here under consideration passed to the lessee a determinable fee in the lands, leaving the lessor the possibility of reacquiring the absolute fee simple title, less whatever mineral may be in the meantime produced and marketed. The court said:
At common law, a grant of land for such a term and for such use and purpose — and no other — created the estate called a base, qualified, or determinable fee, defined by Kent as “ an interest which may continue forever, but the estate is liable to be determined, without the aid of a conveyance, by some act or event, circumscribing its continuance or extent.”
*715It should be noted that the case last cited deals only with the question whether the lessee has a property right in his lease, and defines the extent of such right. With that question we are not concerned here. A mere leasehold constitutes property right as well as a base, qualified, or determinable fee. But be the interest or estate acquired by the lessee what it may, every such interest or estate was included in and merged into the freehold title acquired by the taxpayer out of which such estate or interest was carved. Under the facts presented by this record, we are not concerned with the physical aspects or qualities of the realty purchased by the taxpayer, but only with the title acquired by him. The record discloses that the $1 per acre, which the taxpayer seeks to allocate as cost of the rights granted by him in his lease, was his valuation of his right to grant an estate subordinate to his freehold, i. e., his right to carve out of his freehold a base or an inferior estate. This we hold he can not do. A freehold, like a lump of gold, may be partitioned and the fragments apportioned in severalty, but it is not divisible into elements so as to permit a valuation of its elements, because the gold is the element and itself contains all of value there is in it.
In view of the foregoing, it is held that the first contention of the taxpayer must be denied and, in consequence, it is not necessary to consider further the additional contentions raised by him. His whole case is premised on his first proposition, and that failing, hie whole case must fall.