Lynch v. Alworth-Stephens Co., 267 U.S. 364 (1925)

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Lynch v. Alworth-Stephens Company

No. 273

Argued January 7, 8, 1925
Decided March 2, 1925
267 U.S. 364

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Syllabus

1. The interest of a corporate lessee of a mine under a lease for a term of years obliging it to mine a minimum tonnage of ore annually and to pay the lessor, owner of the fee, a stated royalty per ton mined, is property within the meaning of § 12a of the Income Tax Law of September 8, 1916, which provides that the net income of corporations organized in the United States shall be ascertained by deducting from gross income, among other things, "a reasonable allowance for the exhaustion . . . of property arising out of its use," and specifically, in the case of mines,

a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof which has been mined and sold during the year,

etc. United States v. Biwabik Mining Co., 247 U.S. 116; Von Baumbach v. Sargent Land Co., 242 U.S. 503, distinguished. P. 368.

2. As the mining goes on, the property interest of the lessee in the mine, and that of the owner, are lessened, and in both cases the extent of this exhaustion, with the consequent deduction to be made under the above statute, is arrived at by determining the aggregate amount of the depletion of the mine, based upon the market value of the product, and allocating that amount in proportion to the interest of owner and lessee, severally considered. P. 370.

294 F.190 affirmed.

Certiorari to a judgment of the circuit court of appeals which affirmed a judgment of the district court (278 F. 959) for the present respondent in its action to recover back from an internal revenue collector the amount of an income tax, paid under protest. Upon the death of the defendant, his executrix was substituted.