*2557 Sums received for leasing tracts of land for the purpose of conducting drilling and mining operations thereon are not taxable under the provisions of section 206 of the Revenue Act of 1921.
*538 Deficiencies in income tax have been determined against the petitioners for the year 1922 as follows:
| Abel Bliss | $17,410.18 |
| Mrs. Abel Bliss | $17,410.18 |
| George W. Wetherbee | $16,830.59 |
| Mrs. George W. Wetherbee | $16,830.59 |
The issue common to all of the proceedings is whether the amount received by the copartnership of Wetherbee and Bliss for the exclusive right to conduct drilling and mining operations on certain tracts of land comes within the classification of capital gain as provided by section 206 of the Revenue Act of 1921. Mrs. George W. Wetherbee also questions the right of the respondent to tax her on any portion of the amount received by her husband incident to the execution of the agreements discussed in the findings of fact.
FINDINGS OF FACT.
Petitioners are residents of Shreveport, La. The copartnership of Wetherbee and*2558 Bliss, having as its members, Abel Bliss and George W. Wetherbee, prior to the year 1913 acquired for farming purposes, and held in the year 1922, large tracts of land situated in Bossier Parish, La.
In the year 1922 the petitioners, Bliss and Wetherbee, as members of the copartnership, entered into agreements with the Humble Oil & Refining Co., Gulf Refining Co. of Louisiana, and Standard Oil Co. of Louisiana, for conducting drilling and mining operations on portions of said lands. By the terms of the agreements the copartnership, for stipulated money considerations, gave the oil companies, *539 among other things not here important, (1) the exclusive right to conduct drilling and mining operations on the premises within specified times for the purpose of extracting oil and gas and other minerals therefrom; (2) rights of way and the right to lay pipe lines to convey water, oil, steam and gas; (3) the right to have and use sufficient water, oil, gas and coal from the premises to drill and operate any well that the oil companies bored or shaft they excavated, together with such other privileges as might reasonably be required for conducting such operations, and the right*2559 to remove at any time from the premises any property placed thereon by the oil companies. The oil companies agreed to pay the copartnership certain royalties in the event minerals were found in paying quantities.
During the year 1922 the copartnership received, as consideration for executing the agreements, the sum of $190,000 from the Humble Oil & Refining Co., the sum of $65,000 from the Gulf Refining Co., and the sum of $112,000 from the Standard Oil Co. In addition thereto it received, as royalities on oil extracted from the premises, the sum of $10,904.05 from the Humble Oil & Refining Co., and the sum of $18,825.17 from the Gulf Refining Co.
At the time of the acquisition by the copartnership of the tracts of land covered by the aforesaid agreements, Abel Bliss was married and living with his present wife, and George W. Wetherbee was single. The latter was married to his present wife in 1913.
The petitioners reported their income on the cash receipts and disbursements basis.
OPINION.
ARUNDELL: These proceedings were submitted on the pleadings, a stipulation of facts, exhibits in the form of the several agreements, and a statement of the amounts received by the*2560 copartnership in 1922 under the instruments.
Although the agreements in evidence disclose that all of them were executed in the year 1921, with the exception of the one entered into February 1, 1922, with the Standard Oil Co. of LouisianaPursuant to admissions made by respondent in his answers, we have found as a fact that the several instruments were entered into in the taxable year. Whatever the fact may be in this particular, we are satisfied that the agreements are in legal effect leases, and that the rights disposed of by the lessors did not constitute a sale of capital such as that term is understood in section 206 of the Revenue Act of 1921. ; ; and ; affd. C.C.A. 8th Cir., March 20, 1929. On the authority of these cases, respondent's action is affirmed.
*540 The remaining issue raised by Mrs. George W. Wetherbee goes only to the authority of the respondent to tax her on a gain realized from what she claims to have been a sale of capital assets acquired by her husband before her marriage to him. Our conclusion that the transaction*2561 was not a sale of capital assets but a lease of property, and that the moneys received by the partnership was in the nature of rents or royalties, serves to dispose of the issue raised by her.
Judgment will be entered for the respondent.