Take-or-pay Arrangement

Take-or-pay Arrangement means:
a form of production payment; a guaranteed payment often used by natural gas producers whereby the purchaser of gas agrees to take a minimum quantin' of gas per year if the gas is available for delivery to him or her. If the.

buyer does not take the minimum volume of gas that was agreed upon, the utility or.

pipeline that the buyer represents will have to pay for it anyway at the contract price. Excess take-or-pay payments do not give a gas company an economic interest in the gas in place, so the payments are included in taxable income in the year received. Freede v. Comm., 62 AFTR 2d 88-5927 (CA-10, 1988).