James S. & Denise D. Goodfellow, Daniel R. & Claudia Goodfellow, James B. & Nancy B. Goodfellow - Page 11




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          the coal to the owners.  The taxpayers argued that they were                
          entitled to deduct depletion in connection with these payments              
          because they had a capital investment in minerals (coal) in                 
          place.  The taxpayers argued that their capital investment was in           
          the equipment, facilities, and labor which they expended to mine            
          the coal.  The Supreme Court disagreed.  The Court held that the            
          taxpayers lacked an economic interest in the coal.  The Court               
          noted first that the taxpayers lacked any interest or investment            
          in the coal apart from any interest held under the mining                   
          contracts.  The Court then stated that the contracts gave the               
          taxpayers merely an economic advantage from the strip mining                
          operation.  The Court viewed the following seven factors as                 
          relevant to its decision:  (1) The taxpayers’ investment was in             
          their equipment, all of which was movable, and they lacked an               
          investment in the coal in place; (2) the taxpayers recovered                
          their investment in the equipment through depreciation; (3) the             
          taxpayers’ contracts with the owners were terminable without                
          cause on short notice; (4) the owners never agreed to surrender,            
          nor did they ever surrender, to the taxpayers an interest in the            
          coal in place; (5) title to the coal always vested in the owners,           
          and the taxpayers were not allowed to sell or keep any of the               
          coal but had to deliver it to the owners; (6) the taxpayers                 
          received none of the proceeds from the coal’s sale but were paid            
          for their services a set amount for each ton of coal mined and              






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