William P. Cheng v. Commissioner Internal Revenue Service

William P. Cheng appeals from the Tax Court’s grant of partial summary judgment in favor of the Commissioner of the Internal Revenue Service (Commissioner) upholding the Commissioner’s determination that Cheng’s minimum royalty payments of $20,000 in 1977 and $60,000 in 1978 for unmined diamonds were not deductible under Treas.Reg. § 1.612-3(b)(3) (as amended in 1977). We conclude that we lack jurisdiction for want of an appealable final order and dismiss the appeal.

I

In 1977, Cheng entered into a five-year mining sublease with Imperial Finance, N.V. (Imperial). Under the terms of the sublease, Imperial granted Cheng the right to mine and remove diamonds from a specified parcel of land in South Africa leased by Imperial in exchange for a “minimum annual royalty” of $30,000 per lease year. The minimum annual royalty was subject to recoupment at the rate of $125.00 per carat on the first 1,200 carats (minimum yearly carats) mined by or on behalf of Cheng in that year. In the event the number of carats mined in any lease year was less than the minimum yearly carats, the resulting deficiency (cumulative deficiency) could be carried forward to subsequent lease years.

Although the…