(dissenting).
I respectfully dissent from the conclusion reached by the majority. The findings of fact clearly show that there was an outright sale of the Corpus Christi stock to The Chicago Corporation; that payment was made partly in cash and partly in overriding royalties.
These royalties were wholly unlike the house or apartment rental illustration which is used in the majority opinion. The royalties were a part of the corpus of the property and were in no ordinary sense a payment for a use of the property. It is as if the purchaser of the house or apartment in question has sold a 1/20 interest each year until the entire house or apartment had been disposed of.
In other words, every barrel of oil that is taken out of the ground is a part of the property itself, and when the oil has been taken out of the property by the royalty, the entire ownership is gone.
Although there were several steps involved, the deal through which plaintiffs’ stock in Corpus Christi was sold to Chicago, partly for cash and partly in return for the overriding oil and gas royalties, was in reality a single transaction. As I view it, the controlling point in these cases is the fact that the overriding royalties received by plaintiffs had no ascertainable fair market value at *850the time plaintiffs transferred their interests. In the many cases treating of oil and gas royalties for the purpose of deciding whether there has been a gain or loss under section 111 of the 1939 Internal Revenue Code, 26 U.S.C.A. § 111, for property sold or exchanged, it has always been held that the question of whether the royalties received by the taxpayer have an ascertainable fair market value is a question of fact. Where the factors affecting the valuation are so uncertain, contingent, or speculative that the value cannot be determined with reasonable accuracy, it must be held that the oil and gas interests have no fair market value. That is the situation here as found by the trial commissioner who heard and considered all the evidence bearing on the question. The reasons for this finding of lack of any market value at the time of the transfer are set out in findings 30, 31, and 32. For some reason the majority has seen fit to eliminate these findings.
I think these findings are vital and should be restored. They reveal the issue here to be very similar to that decided by the Supreme Court in Burnet v. Logan, 283 U.S. 404, 51 S.Ct. 550, 75 L.Ed. 1143. The facts affecting the value of the overriding royalties in the instant cases contain more uncertain, unusual, and speculative elements than were present in other cases where it was held that the oil and gas interests considered had no ascertainable fair market value. Edwards Drilling Co. v. Commissioner, 35 B.T.A. 341; Rocky Mountain Development Co. v. Commissioner, 38 B.T.A. 1303. The facts before us show that the only petroleum product of any consequence recovered by Corpus Christi from the land up to the time plaintiffs’ stocks were disposed of was wet gas. There was no market for the gas and the market for the distillate extracted therefrom was unstable and uncertain. Just prior to the closing of" the transaction in suit, the only prospect held out to plaintiffs for recovering the money they had sunk in the venture was the revamping and enlarging of the recycling plant at an expenditure of $855,-000 and by the drilling of additional oil wells. It was suggested that additional products could be recovered from the new plant but whether there would be a market for these and at what price was not known. Oil production was negligible and most of the property was unproven territory. The petroleum engineers who made the reports described in the findings pointed out the indefinite and unknown conditions existing in a considerable portion of the leased land and neither would hazard an estimate as to future oil production. As part of the price for plaintiffs’ stocks, Chicago agreed to drill additional oil and gas wells, but as shown in finding 9, this obligation was subject to contingencies which might never occur.
Added to the above, we have the undisputed showing that plaintiffs failed in their efforts to have several major oil companies place a value upon or make an offer for the properties. Not only were no offers forthcoming, but one major oil company with extensive holdings in the same general area advised plaintiffs to dispose of their interests as quickly as possible.
The taxing authorities placed a value of $1,035,000 on the interests of the minority stockholders, but this valuation was, of necessity, a pure estimate. There are formulas and equations available for estimating the value of almost any kind of property where the use of such methods is appropriate. But estimates do not meet the statutory test of “fair market value.” If these words mean anything, they assume, first, the existence of a market for the particular property, and, second, the presence of sufficient facts to enable fair-minded men to determine the value in that market within the bounds of reasonable accuracy. If the next day or shortly thereafter it had been shown that only dry holes could be found, there is not the slightest doubt that the plaintiffs could have come back and shown the inaccuracy of the collector’s estimate, and could have on that ground secured a deduction *851or a refund. In other words, these estimates are not necessarily final.
The facts in this record demonstrate that when plaintiffs’ stocks were sold, the circumstances that would normally be relied upon to determine market value were shrouded in uncertainty and dependent upon the outcome of future developments. In the light of that record, I would adopt all the findings made by the trial commissioner and hold that since the overriding royalties had no ascertainable fair market value, the sale of plaintiffs’ stocks resulted in an open transaction. On this basis, the payments received by plaintiffs from the sale of the oil and gas produced from the land would be taxable as long-term capital gain because of the open transaction aspect, but no allowance would be made to plaintiffs for depletion. Burnet v. Logan, supra; Commissioner of Internal Revenue v. Carter, 2 Cir., 170 F.2d 911.
LARAMORE, Judge, joins in the foregoing dissenting opinion.