-6-
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). The fact that the parties
submitted this case to the Court fully stipulated does not change
or otherwise lessen petitioners’ burden in this case. Rule
122(b); Kitch v. Commissioner, 104 T.C. 1, 8 (1995), affd. 103
F.3d 104 (10th Cir. 1996).
Section 611(a) provides that a taxpayer may deduct a
reasonable allowance for depletion as to “mines, oil and gas
wells, other natural deposits, and timber”, such allowance being
ascertained under regulations prescribed by the Secretary. As
relevant herein, the applicable regulations, the relevant portion
of which we set forth in the appendix to this opinion, clarify
that a depletion deduction may be claimed only by the taxpayer
with an economic interest in the depleted mineral deposit. Sec.
1.611-1(b)(1), Income Tax Regs.; see also Parsons v. Smith, supra
at 226; Kirby Petroleum Co. v. Commissioner, 326 U.S. 599, 603
(1946); Helvering v. Bankline Oil Co., 303 U.S. 362, 368 (1938).
The regulations explain that an economic interest is present when
the taxpayer has: (1) Acquired by investment an interest in
mineral deposits embedded within the earth (i.e., minerals in
place) and (2) secured, by any form of legal relationship, income
2(...continued)
examinations commencing after July 22, 1998. Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3001(c), 112 Stat. 727.
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