Birkeland v. Commissioner

*211OPINION.

Maeqtjette:

The effect of our findings is to sustain the contentions of the taxpayer as to the deductions for 1919, except in one respect. He claimed a loss of $13,000 for an investment in and loans to the Northern Oil & Gas Co. The proof showed a loss only to the extent of $3,000. As to that item, both the note evidencing the liability as indorser and the check by which the taxpayer discharged that liability were introduced in evidence. The taxpayer claimed to have loaned $5,000 more to the corporation and to have invested $5,000 in stock. There was insufficient proof of the loan. Relative to the investment in stock, we note that the taxpayer claimed, and was allowed by the Commissioner in 1920, a loss of $1,250 for investment in stock of the Northern Oil & Gas Co. There was no evidence of the date when the capital loss actually occurred. In his amended return for 1920 the taxpayer claimed bad debt deductions in the amount of $10,750, deductions for losses by fire, storm, and casualty of $3,522.78, and total deductions under “ Schedule K ” of $14,272.78. The books of account showed bad debts of $1,750, with the inclusion therein of the $1,250 referred to, covering worthless stock in the Northern Oil & Gas Co. In the absence of evidence explaining the partial duplication we can not allow any loss for 1919 by reason of an investment in that stock.

The Commissioner’s determination for 1920 was questioned by the taxpayer in two respects. The Commissioner increased income by the amounts of $48,500 for “rent received from K. B. Birkeland Syndicate not reported,” and $30,628.12 for “ depletion not substantiated.” There was error by the Commissioner as to the item first referred to. The taxpayer’s gross income for 1920 consisted of:

Receipts from oil sales, wells 1 and 2_$45,310,49
Receipts from Birkeland Syndicate_ 48, 500. 00
Receipts from gas sales_ 920. 99
Receipts from oil sales, Humble lease_ 9, 522. 46
Total_104; 253. 94

Therefore, the action by the Commissioner would constitute a duplication of income and the claim of the taxpayer is sustained.

With reference to the depletion deduction, however, we sustain the Commissioner, except to the extent of $2,036.68, which falls *212under the same item but constitutes depreciation as distinguished from depletion. The proof in this appeal makes any computation of a depletion deduction utterly impossible. The taxpayer was Interested in several leases of oil lands during 1920. He had items of income from sales of oil from at least two of them. His testimony referred to but one. Evidence of production in barrels, as shown by pipe-line vouchers, had reference to a name quite different from anything testified to. But even assuming that those records are correct as to production, nevertheless they are valueless in any determination of a depletion allowance, since there is not a particle of evidence to inform us of the cost of the property or leases, the date of acquisition, and the other essential data. Accordingly, we can not disturb the determination of the Commissioner with reference to that item.

The taxpayer also claimed depletion for 1921 in the amount of $2,000.16. For the same reasons we can not compute any depletion allowance. However, the taxpayer is entitled to a deduction of $2,036.68 for the depreciation of the rotary rig in that year.