*1011 1. Taxpayer was organized to carry on the business of selling a sales promotion or advertising plan, originated by its two chief stockholders, known as Bank Night, or the Affiliated System. The system was not patented or copyrighted, although some instruction sheets were copyrighted. Petitioner's income, in excess of 80 percent, was derived from payments from theatre operators under contracts designated as license agreements. Over 50 percent of petitioner's stock was held by less than 5 persons. Respondent determined that petitioner was subject to surtax as a personal holding company under section 351 of the Revenue Acts 1934 and 1936, upon his determination that petitioner's income was derived from royalties. Held, petitioner did not derive over 80 percent of its income from royalties and it was not a personal holding company within the definition in section 351(b).
2. On another issue, on the facts, held, that petitioner is entitled to greater allowances for compensation paid to officers who were both employees and stockholders, for deduction under section 23(a) as a reasonable allowance, than respondent allowed, but in lesser amounts than claimed by petitioner. *1012
*390 The Commissioner determined deficiencies in taxes as follows:
| Year | Income tax | Excess profits tax | Surtax | Total |
| 1934 | $2,944.38 | $2,944.38 | ||
| 1935 | $2,318.02 | $844.50 | 25,111.22 | 28,273.74 |
| 1936 | 10,990.67 | 1,314.33 | 17,016.88 | 29,321.88 |
| Total | 13,308.69 | 2,158.83 | 45,072.48 | 60,540.00 |
It is alleged that the respondent erred in determining that petitioner was a personal holding company within the meaning of section 351 of the Revenue Acts of 1934 and 1936, and in disallowing deductions of certain amounts alleged to have been paid as salaries to the wives of two officers of petitioner.
FINDINGS OF FACT.
The petitioner was incorporated on November 16, 1933, under the laws of Colorado, for the purpose of promoting a system of giving away money prizes by lot in places of entertainment, the system being called "Bank Night" by petitioner. The authorized capital stock of petitioner was 10,000 shares of no par value. At the time of incorporation 100 shares were issued to Rick Ricketson, 100 shares to C. U. *391 *1013 Yaeger, and one share to Emmett Thurmon, at a price of 10 cents a share. The only additional issue of stock occurred November 3, 1934, when Clover Yaeger, wife of C. U. Yaeger, and Maizie Ricketson, wife of Rick Ricketson, subscribed for 100 shares, each. The total stock outstanding from January 1 to November 2, 1934, was 201 shares, and from November 3, 1934, to December 31, 1936, was 401 shares. The original operations of the petitioner were financed by a cash loan of $800 by Rick Ricketson, which was repaid to him in 1934.
The Bank Night system, the use of which petitioner was organized to promote in theatres throughout the United States, was devised by C. U. Yaeger, a manager of the Rocky Mountain division of the Fox Theatres, in the fall of 1933, to be used in stimulating theatre attendance. He placed the system in operation in his district with the result that receipts were increased. The use of the system was mentioned in theatre trade papers and attracted national attention. Yaeger was assisted in developing the system, originally, by Rick Ricketson who also was a manager in the same area.
Petitioner did not own or operate any theatres. The system was operated by*1014 moving picture theatre operators. After the system became known, some theatre owners operated the system themselves, refusing to deal with petitioner. From the outset, many theatre owners contended that petitioner did not have the exclusive right to the use or control of the use of the system. In different localities theatre owners operated the system under various names other than Bank Night. Those who operated the system under agreement with petitioner also used various other names to describe the system such as "Prosperity Night", "Bank Day", "Cash Night", "Gold Night", "Surprise Night", "Fortune Night", depending upon what name seemed suitable in different localities. The use of the system resulted in a very great increase in theatre attendance.
Petitioner described its system, on its agreements with theatre operators and elsewhere, in the following way:
"Bank Night" is an advertising plan designed to stimulate public interest in the Motion Picture Industry and in your theatre. It is not intended to provide a means whereby you can give a prize to your patrons. You, therefore, are instructed to follow the copyright instructions below implicitly, particularly those pertaining*1015 to the awarding of the Bank Account. * * * All persons must be allowed to register without payment of an admission fee. You must give public notice of the above.
The system, as offered to theatre operators by petitioner, was operated by theatre owners under agreements entered into with petitioner, and under instructions written and supplied to them by petitioner. Petitioner also supplied the accessories and materials to operate the system. The materials used in the system included two registration books, cards, posters, and film trailers advertising Bank *392 Night. Petitioner described the system as "The Affiliated System", and stated in its printed instructions that the system was a plan of advertising, and that the system must be used only as a means of advertising.
The Affiliated System was operated in the following way: Any person over 16 years of age was permitted to register in a registration book in the lobby of the theatre without purchasing a ticket, and each name was assigned a number. One registration only was allowed, and transfer of names to a second registration book was made to prevent duplication of names and numbers. A sum of money was placed in*1016 an account in a local bank each week. The drawing night, the name of the bank, and other details were advertised and shown by film trailers on the theatre program. On the drawing night numbered cards were placed in a box container, a drawing was made, usually on the stage of the theatre, and the winning number and name were announced outside and inside the theatre. The winner could enter the theatre to claim the prize without purchasing an admission ticket. The winner was entitled to receive whatever sum was in the bank account on the date of the drawing. If the person whose number was drawn failed to claim the prize in a reasonable time, no award was made, but the amount in the bank account was carried over and added to the next deposit and held for the next drawing until a winner appeared to claim the prize.
Petitioner leased the use of its system for money consideration under written agreement called Bank Night license agreements. The printed form of agreement recites that Affiliated, petitioner, is the owner of the copyrighted name "Bank Night", and of certain copyrights and patent pending of certain cards, register, film trailers, record books, and other accessories to*1017 be used in staging Bank Night. The second party is called a licensee, and the agreement recites that the licensee desires to acquire a limited license to use Bank Night in its theatre. Affiliated reserves the right to defend in the name of the licensee any court proceeding against the licensee attacking its right to exercise the license granted by the agreement. The licensee acknowledges Affiliated's ownership of trade-marks, copyrights and patent pending, and also acknowledges that it is paying only for the rights that Affiliated may have in the things mentioned.
In a majority of the agreements executed by petitioner the consideration for the use of the system was from $5 to $10 a week and was not based upon the substantial increased profits which resulted from the use of the system. The Fox Theatres were permitted to use the system without charge because Yaeger and Ricketson were employed by them when they originated the system, but these theatres paid for supplies used.
*393 In connection with the use of the system petitioner supplied the required materials and gave advice and instructions as to the way to use the system in different localities. Initial supplies, *1018 which cost petitioner $15 per theatre, were furnished without extra charge, but additional supplies were sold at a small profit by petitioner at agreed prices. Petitioner received the following amounts from the sales of supplies in the taxable years: $3,363.16, in 1934; $10,535.33, in 1935; $12,423.55, in 1936. The supplies were not manufactured by petitioner.
In July of 1936 petitioner published a monthly bulletin giving information on matters affecting the system, and instituted a service to theatre owners throughout the United States to give advice on theatre operations. This service was furnished free to persons operating under agreements with petitioner. Petitioner did not receive any income from this service in the taxable years. Also, petitioner defended suits filed against theatre operators charging that the use of the system constituted a lottery.
Petitioner has never owned a patent on its Affiliated System. Yaeger made application, on November 21, 1933, for a patent on "Means for Conducting Prize Drawings", but it was rejected on January 16, 1934. An amendment to the application was rejected on April 11, 1935. Petitioner made applications for patent in 1937*1019 and 1938, which were rejected in the same years on the holding that "the art cited is unpatentable." The period for appeal for these rejections has expired.
Petitioner did not attempt to register the name "Bank Night" as a trade-mark with the United States Department of Commerce, but applications were made in most states to register the name as a trademark as applying to a system of free giveaways.
Petitioner obtained copyrights on certain film trailers, instruction sheets which described the method of operating the system, and special notice stating that Bank Night is an advertising system. These copyrights on separate written items, referred to above, were obtained in 1933, 1934, and 1935. The copyrighted materials were used for various lengths of time in the taxable years until substitutes were copyrighted. After September 1, 1934, no attempt was made to copyright trailers.
The office of the petitioner was in Denver, Colorado, where it employed stenographers, bookkeepers, and clerks to the number of 3 to 6 in 1934, 6 to 13 in 1935, and 13 to 22 in 1936. The office was on the ground floor and on part of a second floor of a small building. Accessories and supplies were*1020 packed and shipped from this office.
During the taxable years involved petitioner had in its employ a general sales manager, Claude Ezell, who received 10 percent of the *394 gross receipts for his compensation and expenses. He traveled extensively on petitioner's business. He had been in the moving picture business for 25 years. The petitioner by agreement in writing, called distributor's agreement, appointed distributors in 26 "key" cities in the United States. These distributors obtained the execution of license agreements by theatre operators and were charged with the duty of explaining the operations of the system and enforcing compliance with the "Bank Night" instructions. During the year 1936, the distributors of petitioner maintained offices and supply centers in 27 cities, including Honolulu. In 1934 the distributors were paid $27,706.67; in 1935, $87,224.30; and in 1936, $184,712.91. The petitioner expended for attorney fees in 1934, $5,846.52; in 1935, $16,835.99; and in 1936, $33,594.53. About 41 attorneys were employed in approximately 30 cities in 1936, and the above amounts were expended for the most part in protecting the use of the system against*1021 lottery charges.
The gross income of petitioner for the taxable years was derived from the following sources and was in the following amounts:
| 1934 | 1935 | 1936 | |
| From license agreements: | |||
| Fees averaging from $5 to $10 per theater per week, required to be paid weekly, regardless of use of system | $100,028.93 | $348,323.91 | $755,573.37 |
| Fees based on percentage of gross receipts of theater on day system used | 13,590.08 | 5,316.17 | 1,531.39 |
| Accessories | 3,363.16 | 10,535.33 | 12,423.55 |
| Subrentals | 290.00 | 1,030.00 | |
| Total | 116,982.17 | 364,465.41 | 770,558.31 |
The expenditures made by petitioner in the operation of its business in the taxable years were as follows:
| 1934 | 1935 | 1936 | |
| Cost of operations for office salaries, accessories, traveling, telephone, office supplies, attorney fees, payments to distributors | $48,932.52 | $142,138.43 | $258,422.06 |
| Executive salaries, rent, taxes, etc | 42,667.03 | 63,153.14 | 112,344.36 |
| Total | 91,599.55 | 205,291.57 | 370,766.42 |
Petitioner's net income, not adjusted for any audits by the respondent, in each of the taxable years was as follows:
| 1934 | $25,382.62 |
| 1935 | 159,173.84 |
| 1936 | 399,791.89 |
*1022 During the taxable years petitioner's assets consisted of cash, accounts receivable, notes receivable, and furniture and fixtures, and in 1936 one item carried at $2,500, described as an investment. Petitioner's liabilities consisted of accounts payable, accrued taxes and expenses, *395 capital stock, and undivided profits. Capital stock was carried each year at $40.10.
Petitioner discontinued vending or licensing the use of the "Bank Night" system on April 14, 1938, when a fraud order was issued against it by the Post Office Department of the United States upon the ground that the use of the system constituted a lottery in contravention of the United States statutes.
In the taxable years, petitioner was engaged in a nation-wide business of promoting and vending to others the use of its system of giving away prizes by lot, which system was offered to theatre operators as a method of advertising to increase patronage. Petitioner was not a personal holding company within the terms of section 351 of the Revenue Acts of 1934 and 1936.
Clover Yaeger, prior to her marriage in 1932 to C. U. Yaeger, had had some experience as a theatre cashier and after her marriage traveled*1023 with her husband when he was employed as a district manager by Fox Theatres. At the time the Affiliated System was devised, she was consulted and assisted to some extent in devising the system. She managed petitioner's office from the date it was opened until July 1, 1934. In 1934 she was paid a salary of $1,017.50. On November 3, 1934, she was elected director and assistant secretary. During 1935 and until July 1, 1936, she had a desk in the main office where she supervised purchasing and mailing supplies and assisted her husband in the management of the business. In 1935 she made two trips to California and in 1936 she made five trips to various places, each averaging about two weeks, in connection with petitioner's business. These trips were made with her husband pursuant to authorization of the board of directors of petitioner, which was composed of C. U. Yaeger and his wife, and Rick Ricketson and his wife.
Prior to 1921 Maizie Ricketson was engaged in the newspaper business for several years. After her marriage to Rick Ricketson she was interested, with her husband, in the operation of moving picture companies in Colorado and other western states. She assisted in*1024 the operation of the theatres and in keeping the books thereof, and she became familiar with the details of theatre operation. She was elected a director and assistant vice president of petitioner on November 3, 1934. She visited the offices of petitioner at least once each week during 1935 and 1936 and conferred with C. U. Yaeger regarding the business of petitioner. She conferred informally from time to time during those years with the other directors regarding petitioner's business.
On September 20, 1935, the board of directors instructed Maizie Ricketson and Clover Yaeger to make a survey to ascertain whether the exhibitors were living up to the rules and regulations. They *396 made a partial survey and reported at the directors' meeting of October 5, 1935. A further report was made by them at the directors' meeting of November 9, 1935, with recommendations for altering the rules and regulations to improve the system. To them was assigned the duty throughout 1935 and 1936 of studying and making recommendations to petitioner with reference to the best method of modifying or altering the system in order to induce women to patronize theatres using the system. Sixteen*1025 meetings of the board of directors were held during 1935, and 18 during 1936, all of which were attended by Maizie Ricketson and Clover Yaeger.
During 1935 and 1936 Clover Yaeger and Maizie Ricketson were paid, pursuant to authorization by the board of directors, the following sums as salaries:
| 1935 | 1936 | |||
| Per week | Per year | Per week | Per year | |
| Clover Yaeger | $225 | $11,700 | $400 | $20,800 |
| Maizie Ricketson | 150 | 7,800 | 250 | 13,000 |
| Total | 19,500 | 33,800 |
Petitioner included the above amounts in the deductions taken for salaries, as business expenses, in its returns for the taxable years. Respondent determined that no deductions could be allowed in 1935 or 1936 for the sums paid to Maizie Ricketson, and that allowable deductions for sums paid to Clover Yaeger as salary consisted only of $1,200 for 1935 and $600 for 1936. Respondent disallowed as "excessive salaries" the sums of $18,300 for 1935 and $33,200 for 1936, with respect to the amounts paid as salaries to Clover Yaeger and Maizie Ricketson.
Total salaries paid by petitioner were as follows:
| 1934 | 1935 | 1936 | |
| Executives' salaries | $41,200.00 | $58,500.00 | $88,400.00 |
| Office salaries | 2,867.45 | 5,837.60 | 15,101.09 |
*1026 A reasonable allowance for compensation for personal services actually rendered to petitioner in the taxable years is as follows:
| 1935 | 1936 | |
| Clover Yaeger | $2,400 | $1,800 |
| Maizie Ricketson | 1,200 | 1,200 |
| Total | 3,600 | 3,000 |
*397 OPINION.
HARRON: Issue 1 - Compensation for personal services. - Under section 23(a) of the Revenue Acts of 1934 and 1936 a taxpayer may deduct as business expense all ordinary and necessary expenses paid or incurred, including a reasonable allowance for salaries or other compensation for personal services actually rendered. The respondent has made a determination, which is prima facie correct, that a reasonable allowance for compensation for the personal services of Clover Yaeger is $1,200 and $600 for 1935 and 1936, respectively. He has disallowed in full deductions claimed for sums paid to Maizie Ricketson for the services performed by her. The burden is upon petitioner to introduce evidence to overcome the prima facie correctness of respondent's determination.
Petitioner relies upon the facts as set forth in the findings of fact to sustain the burden of proof upon it to show that a reasonable allowance for*1027 compensation for the two officers in question, for purposes of deduction under section 23(a), is a total of $19,500 for 1935 and $33,800 for 1936, as claimed on the returns for those years. This proceeding has been submitted on a stipulation of facts. As stipulated, the facts show that each of the individuals in question rendered services to petitioner in each taxable year, but the facts do not show how much time each individual devoted in the respective services; and they provide little by which to measure the value to petitioner of the services performed. The question requires determination of what is a reasonable allowance as an ordinary and necessary business expense for compensation for the services actually rendered by each of the persons involved.
Both persons rendered some services to petitioner in each taxable year, the nature of which is not as fully described, as we think it should be; and Clover Yaeger's services were more extensive than those of Maizie Ricketson. The evidence also shows that each was a stockholder and director; that each was a wife of one of the two men who built up petitioner's business; that the board of directors comprised C. U. Yaeger, Rick*1028 Ricketson, Clover Yaeger, and Maizie Ricketson; that the undivided profits of petitioner, according to balance sheets, were $14,855 in 1934; $122,352 in 1935; and $287,537 in 1936. There is no evidence as to the amount of dividends distributed to stockholders in 1935 and 1936, if any. There is no evidence as to the salaries paid in the taxable years to C. U. Yaeger and Rick Ricketson, who were also officers and stockholders, so that it is not possible to judge the value to petitioner of the services of the two officers in question by means of any comparison with the services rendered to petitioner by the other officers. Also, there is no evidence to show *398 what petitioner would have had to pay to get others to do what Clover Yaeger and Maizie Ricketson did. It also is a fact that the compensation paid to each person in question was almost twice as great for 1936 as for 1935, but there is no evidence to show that there was a commensurate increase in the services of each person or in the value thereof to petitioner to justify allowance of the increases as ordinary and necessary business expenses. While Maizie Ricketson had been engaged previously in newspaper work, there*1029 is no evidence as to the compensation paid to her by other employers for, perhaps, similar work. Further, there is no evidence to prove that the payments in question were not influenced by family considerations and were not disguised distributions of profits. . In short, aside from showing that each of the officers and stockholders in question rendered some services to petitioner in the taxable year, the petitioner has introduced only very meager evidence in support of its allegation that the services were reasonably worth, as ordinary and necessary business expense, the large sums deducted in the returns. The approval of the compensation paid in the taxable years by petitioner's board of directors is not conclusive of the reasonableness of the compensation for purposes of deduction as an ordinary and necessary business expense. ; .
The amounts in question constituted high annual salaries. The total amount paid Clover Yaeger in 1935 represented an increase of $10,000 a year over the total amount paid to*1030 her in 1934; and the sum paid to her in 1936 represented an increase of $8,300 over the sum paid to her in 1935. But it appears that Clover Yaeger rendered greater services in 1935 and 1936 than she had done in 1934. It also appears that in July 1936 she discontinued some of the office work she had been doing in 1935. Maizie Ricketson's services in the taxable years do not appear to have been worthless, nor do they appear to have increased in 1936 over what they were in 1935. Upon due consideration of the evidence it is held that a reasonable allowance, under section 23(a), for compensation for services performed by Clover Yaeger is $2,400 in 1935, and $1,800 in 1936; and, for services performed by Maizie Ricketson, $1,200 in each year. This has been found as a fact. See ;; affd., ; ; ; cf. *1031 ; ; ; affd., .
*399 Issue 2 - Was petitioner a personal holding company? - The respondent determined that 80 percent of petitioner's net income for the taxable years was properly attributable to royalties as that term is used in section 351 of the Revenue Acts of 1934 and 1936, 1 and as defined in article 351-2 of Regulations 86 and 94. 2 Accordingly, respondent determined that petitioner was subject to surtax in 1934, 1935, and 1936, under section 351.
*1032 The question is whether or not petitioner is a personal holding company, subject to surtax, within the definition of section 351(b). The answer to this question turns upon whether or not petitioner's income in 1934, 1935, and 1936 was derived from royalties.
The facts were stipulated and have been set forth at length in the findings of fact. Briefly, the nature of petitioner's business was to sell to theatre operators an idea and to provide them with a few simple articles to execute the idea, both for charge covered by contracts. The so-called system was a sales promotion or advertising plan, intended to increase patronage of moving picture theatres. From the beginning petitioner was aware of the difficulties involved. First, while petitioner hoped to obtain an exclusive right to its system by obtaining a patent, it knew in January of 1934, when a patent application was rejected, that it was extremely doubtful whether exclusive control over the use of the system could be obtained. Second, petitioner was fully aware of the possibility that the system could be attacked as a lottery. In spite of the apparent dangers, petitioner obtained many contracts from theatre owners, *1033 who paid petitioner a stated sum of a weekly basis for the use of the system. The contracts were in the form of licensing agreements, and this gives rise to respondent's claim that the income from the *400 agreements constituted license fees or royalties. A license fee is, generally speaking, synonymous with royalty. See 48 C.J. 276, par. 447.
But petitioner had no property rights in its idea or system on which it could give licenses to others. The means of carrying on the system were not patentable. We should not and need not ignore judicial determinations relating to petitioner's business, such as the following decisions: , decided December 3, 1936, by the Circuit Court of Appeals for the Tenth Circuit; and , decided December 18, 1936, by the Circuit Court of Appeals for the First Circuit. In the Gantz case, petitioner sued to enjoin Gantz from using petitioner's system or one similar to it, upon a claim of ownership of a property right therein on the basis of copyrights held on the instruction sheets and a claim to trade-mark*1034 rights in the name "Bank Night" in the State of Oklahoma. In the Gruber case, petitioner sued to enjoin a competitor from using a similar system under the name of "Parlay Cash Night." Petitioner alleged ownership of property rights in its system on the same grounds as in the Gantz case, and petitioner alleged unfair competition. In deciding each case adversely to petitioner's claims, the respective courts held as follows: (1) That petitioner was not entitled to restrain others from the use of the system; that the use of the system could not be covered by copyright; that petitioner had no right at large in a trade-mark to constitute an exclusive right to use the system described by the name Bank Night; that the system was so closely akin to a lottery as to be not entitled to the protection of a court of equity; (2) that petitioner had no property right in the system, which, having been disclosed to the public could be copied along similar plans and used by others in the same way; that the system itself, being in no sense a writing, could not be copyrighted, and in fact was not copyrighted; that the use of a similar system by others did not constitute unfair competition; that*1035 petitioner had no property right in the system, although it had expended time and money in developing the system.
In the Gruber case the court said:
While the plaintiff restricts operating under the system to its licensee, by its very nature, in order for it to operate, knowledge thereof must be thrown open to the public and any property right based upon secrecy was lost as early, at least, as the first public exhibition, and there was no surreptitious appropriation of knowledge of the system by the defendants.
In the face of the above situation, it is the essence of respondent's position that petitioner actually did obtain income through license of its system to others under a purported ownership of a property right, *401 the use of which purportedly could be licensed; and that, therefore, the income received constituted royalties within the meaning of the definition prescribed in section 351(b).
Petitioner contends that, in spite of the form of its contracts as license agreements, since payments were made on a weekly basis in a flat sum, regardless of use of the system, the income from the contracts was in the nature of rents and was not royalties. Petitioner*1036 argues that the wording of the statute "can not be extended by implication, and in case of doubt, construction must be against the government", citing .
The facts are that at least 80 percent of petitioner's income was derived from the so-called license agreements and more than 50 percent of its stock was owned in each taxable year by not more than five persons.
Upon due consideration of all the facts, we are of the opinion that petitioner was not a personal holding company within the statutory definition. Petitioner had no exclusive property rights in its system. In January of 1934 the first application for a patent was rejected. The copyrights covering instructions and descriptive material did not extend to, and could not extend to, covering the entire system so as to give petitioner exclusive rights in the use thereof. Petitioner's income was in reality, income from a sales-promotion scheme for which many believed it worth the payment of fee. They received certain services by way of receiving all materials assembled for use under written instructions, in addition to the idea of operating the*1037 system.
We said in , that "our first resort should be to the natural, ordinary and familiar meaning of the words used" in the statute in construing the terms of section 351(b). In this case, we are of the opinion that the ordinary and familiar meaning of the term royalties does not extend to the sort of income which petitioner succeeded in obtaining under its bold contracts. Accordingly, it is held that respondent erred in determining that petitioner was subject to surtax under the provisions of section 351.
Reviewed by the Board.
Decision will be entered under Rule 50.
DISNEY concurs only in the result.
MURDOCK, ARNOLD, and OPPER dissent.
Footnotes
1. SEC. 351. SURTAX ON PERSONAL HOLDING COMPANIES.
* * *
(b) Definitions. - As used in this title -
(1) The term "personal holding company" means any corporation * * * if - (A) at least 80 percentum of its gross income for the taxable year is derived from royalties, dividends, interest, annuities, and (except in the case of regular dealers in stock or securities) gains from the sale of stock or securities, and (B) at any time during the last half of the taxable year more than 50 per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals. ↩
2. ART. 351-2. Classification of a personal holding company. - * * *
* * *
From the standpoint of the nature of the gross income, a corporation comes within the definition of a personal holding company for any taxable year when 80 per cent or more of its gross income for such taxable year was derived from the following sources:
(1) Royalties.↩ - The term "royalties" includes amounts received for the use of or for the privilege of using patents, copyrights, secret processes and formulas, good will, trade marks, trade brands, franchises, and other like property. It does not include rents, nor over-riding royalties received by an operating company. As used in this paragraph the term "overriding royalties" means amounts received from a sublessee by the operating company which originally leased and developed the natural resource property in respect of which such overriding royalties are paid.