-8-
deduction to the amount of any investment. United States v.
Swank, 451 U.S. 571, 576 (1981). Percentage depletion deductions
continue as long as minerals are extracted from the property, and
even where a taxpayer has invested no money in the deposit. Id.
at 576-577. Nor must the taxpayer claiming percentage depletion
as to a mineral deposit have legal title over the deposit. Kirby
Petroleum Co. v. Commissioner, supra; Lynch v. Alworth-Stephens
Co., 267 U.S. 364 (1925). The linchpin of a percentage depletion
deduction is that the taxpayer has an economic interest in the
mineral deposit for which the deduction is claimed. Commissioner
v. Southwest Exploration Co., supra; Kirby Petroleum Co. v.
Commissioner, supra at 603.
Here, we find that GBI never had the requisite economic
interest in the minerals (unusable materials) in place. GBI
neither purchased by investment, nor contracted for, any interest
in those materials as they sat embedded in the ground. GBI
received the materials only after they were rejected by the
landowners’ engineer following the materials’ excavation from the
ground. GBI’s receipt of the unusable materials at that time
resulted from its contractual obligation to dispose of minerals
once owned and now abandoned by the landowners, rather than from
its purchase of minerals from the landowners.3
3 We express no opinion as to whether we would have decided
this case differently had the landowners agreed to sell to GBI an
(continued...)
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