The court relied on the doctrines of constructive receipt and cash equivalence while reiterating that substance rather than form should control income tax laws.

The taxpayers made a contract for oil and gas royalty payments with "bonuses" payable in two subsequent years.

The Commissioner found the “bonus” payments to be taxable at the time they were created and assigned to the extent of their fair market value subject to depletion, computed by applying a four percent discount.

The Tax Court found the "bonus" payments to be taxable at their full face value in the year of the agreement and at ordinary income rates (no depletion).

The court remanded the case to determine whether the “bonus” obligations were cash equivalents and therefore taxable in the year they were assigned.