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Trends in the Economic Interest Concept of Oil and Gas and Mining Tax Law

Joseph T. Sneed, Proceedings of 6th Annual Rocky Mountain Mineral Law Institute (1961)

Almost a year and a half ago on a platform before lawyers and accountants learned in the tax law relating to mineral interests, I sought to assist the clarification of the law in respect to the economic interest concept. My remarks at that time concluded by suggesting that if the law makers would conduct a diligent search for the factors necessary to the existence of an economic interest for a period of five years much of the then existing confusion surrounding this concept would disappear. The intervening period has, it must be admitted, not witnessed remarkable strides in this direction. And yet, probably during no other period of comparable length in the history of the federal income tax law has there been quite as much concern about, and refined analysis of, the economic interest. Judge Brown's vigorous dissent in Scofield v. LaGloria Oil & Gas Co.,1 Judge Tuttle's majority opinion in the same case, the Supreme Court's decision in Parsons v. Smith,2 and opinions in almost a score of other cases reveal a troubled inquiry. These efforts have borne some fruitalthough no bumper crop it should be added. The economic interest today is not precisely what it was eighteen months ago. How it differs and the source of these differences will be the substance of this paper.

[36] DEVELOPMENT OF THE ECONOMIC INTEREST CONCEPT

But first the stage must be set. Most of you