
    SPALDING v. UNITED STATES.
    No. 7350-Y.
    District Court, S. D. California, Central Division.
    Jan. 16, 1937.
    Miller, Chevalier, Peeler & Wilson (by Joseph D. Peeler), of Los Angeles, Cal., for plaintiff.
    'Peirson M. Hall, U. S. Atty., by E. H. Mitchell and Eugene Harpole, Sp. Asst. U. S. Attys., all of Los Angeles, Cal.
   YANKWICH, District Judge

(after stating the facts as above).

The court decides the questions of law as follows:

1. Notwithstanding the assignment of the lease by the plaintiff, the interest retained by him expressed in royalty, is a valuable economic interest in the leasehold and oil, even if we consider it merely as a reservation of rent or royalty, under the principles announced in the opinion this day filed in Caroline Spalding v. United States (D.C.) 17 F.Supp. 957. Therefore the plaintiff was entitled to depletion allowance on the amounts received on State Lease No. 92.

2. Under the principles declared in the same opinion, and the cases there cited, the assignees of the plaintiff also acquired an economic interest, so that the plaintiff is entitled to deduction for the amounts' paid to them under the assignment. They,, not he, should pay the tax on them.

Judgment accordingly.  