Grimes

Alleging overpayment, taxpayers Grimes and McCarrell have instituted this suit against the United States for recovery of 1953 income taxes paid by them.

Grimes and McCarrell, as partners, contracted with the owners of a deposit of bentonite to engage in the extraction of that material. The material so extracted was subsequently sold by the owners. Grimes and McCarrell realized a net profit from their extraction operations and claimed a percentage depletion allowance upon that profit.

The district court rejected Grimes’ claim to depletion allowance upon the ground that he had no economic interest in the deposit. Grimes has taken an appeal from that judgment. The district court, finding that McCarrell had an economic interest independent of his extraction operation, allowed him to take depletion upon the income in question. The United States has appealed from that judgment.

[l] As to Grimes, the question presented is whether, under the circumstances of this case, one engaged under *625 contract in the removal of clay has an economic interest in the deposit. We have concluded that he has not and that upon the appeal of Grimes judgment must be affirmed.

As to McCarrell, the…