v. Logan does not overrule or in any way affect the decision in Rosenberger v. McCaughn. In Burnet v. Logan the attempt was to tax part of the price of a sale as income or profit. What the plaintiff owned and sold was not minerals, but stock in a corporation. The corporation in turn owned stock in a second corporation, which second corporation had leased a mine and was taking out ore. It (the second corporation) did not own the land, only the ore which it had taken out and presumably paid the owner for. The price which the plaintiff received when she sold her stock was part cash down and part deferred payments at the rate of 60 cents per ton on the purchaser's share of the coal mined.
If, as counsel suggests, we should disregard the corporate entities standing between the plaintiff and the ore itself, instead of appearing to be on all fours with the present case, Burnet v. Logan will be seen to present a diametrically different state of facts. Adopting the suggestion, and assuming that the mineral rights were the only assets involved, the plaintiff in Burnet v. Logan was in the position of the lessee of the mine, not the lessor.In other words, through the medium of two corporations she had an interest in a contract with the owner of the land. This she sold, and the question was whether she had derived any taxable profit from the sale and, if so, how much. The price for which she sold the contract was partly payable in installments. These installments were to be measured by the amount of ore which the purchaser might mine. Of course, the installments would decrease and possibly cease altogether as the ore becomes depleted. But they would also cease if mining was suspended for any other reason, because the lease did not require production of either maximum or minimum tonnage. In Rosenberger v. McCaughn (and in the instant case) the taxpayer was on the other side of the lease.
The Supreme Court pointed out explicitly that the case did not involve royalties or deductions from gross income because of depletion of mining property, and the court could scarcely have made it clearer that it did not intend to disturb the rule for apportioning royalties between income and capital in cases is which depletion of mining property is involved.
I conclude that the decision in Burnet v. Logan does not touch this case, and that I am bound by the decisions of the Circuit Court of Appeals for this circuit in New Creek Company v. Lederer and Rosenberger v. McCaughn.
The plaintiff concedes that if the method used by the commissioner is applicable at all, the calculations involved are as fair and accurate as can be. The only question raised is as to the use of the method itself. It follows that an amendment will not help the plaintiff.
Judgment may therefore be entered for the defendant upon the demurrer.
NOTE. -- I have called the instrument a "lease" throughout this opinion for convenience only.Under Rosenberger v. McCaughn, supra, and Von Baumbach v. Sargent Land Company, 242 U.S. 503, 37 S. Ct. 201, 61 L. Ed. 460, it does not matter what it is. The point is that the royalties are taxable under the income tax law.
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