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Respondent determined that the proper rate of depletion for
petitioner's red landscaping rock is 5 percent, not 14 percent.
Respondent has not proposed adjustments in connection with
petitioner's depletion deductions except for those claimed for
dolomite sold as red landscaping rock.
Discussion
Section 611 provides for a reasonable allowance for
depletion in the case of mines. This allowance is "the
percentage, specified in subsection (b), of the gross income from
the property excluding from such gross income an amount equal to
any rents or royalties paid or incurred by the taxpayer in
respect of the property." Sec. 613(a). Section 613(b)(6)
provides in relevant part:
(6) 5 Percent--
(A) gravel, peat, pumice, sand, scoria, shale
* * *, and stone (except stone described in paragraph
(7));
Section 613(b)(7) specifies a 14-percent depletion rate for:
all other minerals, including, but not limited to,
* * * dolomite, * * * limestone, * * * stone (used or
sold for use by the mine owner or operator as dimension
stone or ornamental stone), * * * except that, unless
sold on bid in direct competition with a bona fide bid
to sell a mineral listed in paragraph (3), the
percentage shall be 5 percent for any such other
mineral * * * when used, or sold for use, by the mine
owner or operator as rip rap, ballast, road material,
rubble, concrete aggregates, or for similar purposes.
* * *
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