Spalding

The plaintiff, Caroline C. Spalding (to be referred to as “the taxpayer”), brought two actions for the recovery of income taxes alleged to have been collected erroneously from her for the years 1929 and 1930. Recovery is sought of $27,125.39 for 1929, and for 1930 recovery is sought of $31,612.39 with interest. The facts under ■jmich the controversy arises have been stipulated.

During 1929, the plaintiff- and her husband, Silsby M. Spalding, owned a ranch bordering on the Pacific Ocean in Santa Barbara County, Cal. On March 21, 1929, each of- them obtained a permit to prospect for oil and gas upon certain state tidelands adjoining their ranch. Plaintiff’s permit was designated as Permit No. 93, and her husband’s as Permit No. 92.

Prior to the expiration of the time limit set forth in the permit, .the plaintiff was developing the property at her own expense and on her own responsibility. On November 16, 1929, a well was brought in, and on November 23, 1929, plaintiff obtained Lease No. 93 from the State of California on the property. On December 19, 1929, plaintiff entered into a “drilling agreement” with the Pacific Western Oil Company (to be referred to as “the Oil Company”),…