
    State Consolidated Oil Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 35047.
    Promulgated March 11, 1930.
    
      G. O. Carlson, C. P. A., and Frank Mergenthdler, Esq., for the petitioner.
    
      J. L. Baekstrom, Esq., for the respondent.
   Sternhagen:

Respondent determined a deficiency in income tax for 1923 of $12,089.50. The questions raised are entirely of fact to arrive at reasonable allowances for depletion and depreciation. It is only necessary to find the facts from the evidence.

FINDINGS OE FACT.

The petitioner is a California corporation. On September 7, 1923, at a cost of $121,537.89 it acquired from E. J. Miley a 45 per cent interest in an oil lease on lots 43 to 48, inclusive, block 4, Windemere Tract, in Los Angeles County, California, upon which oil had been discovered by Miley on March 17, 1923. At the date of acquisition the petitioner’s interest in the estimated recoverable oil was equivalent to 165,000 barrels. During 1923 petitioner’s share of production was 61,665 barrels, and a reasonable allowance for depletion of petitioner’s interest for 1923 is $45,422.

At the same time, September 7, 1923, petitioner acquired certain oil-well equipment at a cost of $35,870.17, the salvage value of which would probably be $1,200. A reasonable allowance in 1923 for exhaustion thereof is $12,957.05.

Prior to 1923 petitioner acquired a five-sixths interest in the oil on the Dabney property, Huntington Beach, California, upon which it discovered oil on February 20 or 21, 1923. Petitioner’s interest was equivalent to 700,000 barrels and its discovery value was $360,000. Petitioner’s share of oil production in 1923 was 238,944 barrels. Its net income from the sale of oil and gas without allowance for depletion was $172,454.58. A reasonable allowance for 1923 for depletion of petitioner’s interest in the Dabney property is $122,817.21.

The oil-well equipment on the Dabney property cost petitioner $68,444.51 and the salvage value thereof was reasonably estimated, to be $1,500. A reasonable allowance in 1923 for exhaustion thereof is $22,843.04.

Judgment will be entered under Rule 50.  