The opinion
Black,
dissenting: I see no distinction in substance in the facts in the instant case from those which the Board had before it in J. H. Tippett, Administrator, 25 B.T.A. 69 , and in which we held directly contrary to the conclusion reached in the majority opinion. It seems clear that in tho instant case the lessor and the lessee were agreed that the oil royalty was to be paid equally to the State of Texas and to the partnership, the 0-2 Ranch. One sixteenth of the oil produced under the terms of the lease was to be paid to the State of Texas and one sixteenth was to be paid to the 0-2 Ranch. Of course the Commissioner is making no contention that the one sixteenth oil royalty paid to the State of Texas is taxable to anyone. It is exempt from taxation. As to the $29,283.02 bonus, it was all to be paid to the 0-2 Ranch; it was in fact paid to the 0-2 Ranch and the 0-2 Ranch placed the funds in its own business, used them as its own, and, so far as the facts show, still has them there and has never paid over one penny of this $29,283.02 to the State of Texas.
The facts on this point are shown by the stipulation, as follows. Paragraph 7 of the stipulation says:
When tho bonuses aggregating $29,283.02 referred to in paragraph (5) above, were paid to the 0-2 (Ranch, a partnership in 1029, the partnership took the money so received and used it generally in its business.
Again, in paragraph 9 of the stipulation, it is said:
Neither in taxable year 1929, nor at any time since, have petitioners or the 0-2 Ranch, a partnership, paid over to tho State of Texas, or any person or corporation, any portion of the bonuses aggregating $29,283.02 referred to in paragraph (5) of this stipulation.
*314 Under these circumstances it seems clear to me that petitioners are taxable with their part oí this bonus under the doctrine laid down by the Supreme Court in North American Oil Consolidated v. Burnet, 286 U.S. 417 . The Supreme Court’s decision in the latter case had not been made at the time we decided J. H. Tippett, Ad ministrator, supra, but it seems to me it confirms the correctness of our decision in that case.
The Supreme Court in the North American Oil Consolidated case, laid down the rule as follows:
* * * If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent. See Board v. Commissioner of Internal Revenue, (O. C. A.) 51 F. (2d) 73, 75, 76. Compare United States v. S. S. White Dental Manufacturing Co., 274 U. S. 398, 403 , 47 S. Ct. 598 , 71 L. Ed. 1120 . If in 1922 the government had prevailed, and the company had been obliged to refund the profits received in 1917, it would have been entitled to a deduction from the profits of 1922, not from those of any earlier year. Compare Lucas v. American Code Co., supra.
If the petitioners in this case ever pay over to the State of Texas any of this bonus payment, it will be soon enough then for them to take the deduction.
Having thus far paid none of it and during the taxable year involved having received it all and “ used it generally in its business ” (as agreed in the stipulation), it is taxable to petitioners, under North American Oil Consolidated v. Burnet, supra, and I think the majority opinion is erroneous in holding otherwise.