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Since, with respect to three of the contracts at issue,
petitioners did not cut the timber in the year that the
downpayment was made, they were not entitled to a current
depletion deduction for the payment.
Under regulations provided by the Secretary, "advanced
royalties" in the case of mineral deposits and standing timber
may be the subject of depletion deductions. Sec. 1.612-3(b),
Income Tax Regs. An advanced royalty is a required payment of
royalties on a specified number of units of timber annually
whether or not cut within the year that may be applied against
the royalties on the timber thereafter cut. See sec. 1.612-
3(b)(1), Income Tax Regs. The facts in the record of this case
are not sufficient to support the treatment of petitioners'
downpayments as advanced royalties. The timber contracts are not
part of the record. There is no evidence that petitioners'
downpayments were based on a specified "number of units of
timber", or that the downpayments were capable of being applied
to any future royalties, and there were no "annual" payments.
From the facts available in the record, we are unable to find
that petitioners were entitled to treat their downpayments on
timber contracts as advanced royalties.
Even if petitioners' payments did constitute advanced
royalties, we find no authority for their current deductibility
by petitioners. Section 1.612-3(b)(1), Income Tax Regs., allows,
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