-17-
APPENDIX
Sec. 1.611-1. Allowance of deduction for depletion.--
(a) Depletion of mines, oil and gas wells, other
natural deposits, and timber--(1) In general. Section
611 provides that there shall be allowed as a deduction
in computing taxable income in the case of mines, oil
and gas wells, other natural deposits, and timber, a
reasonable allowance for depletion. * * * In the case
of other [than standing timber] exhaustible natural
resources the allowance for depletion shall be computed
upon either the adjusted depletion basis of the
property (see section 612, relating to cost depletion)
or upon a percentage of gross income from the property
(see section 613, relating to percentage depletion),
whichever results in the greater allowance for
depletion for any taxable year. In no case will
depletion based upon discovery value be allowed.
* * * * * * *
(b) Economic interest.--(1) Annual depletion
deductions are allowed only to the owner of an economic
interest in mineral deposits or standing timber. An
economic interest is possessed in every case in which
the taxpayer has acquired by investment any interest in
mineral in place or standing timber and secures, by any
form of legal relationship, income derived from the
extraction of the mineral or severance of the timber,
to which he must look for a return of his capital. * *
* A person who has no capital investment in the
mineral deposit or standing timber does not possess an
economic interest merely because through a contractual
relation he possesses a mere economic or pecuniary
advantage derived from production. For example, an
agreement between the owner of an economic interest and
another entitling the latter to purchase or process the
product upon production or entitling the latter to
compensation for extraction or cutting does not convey
a depletable economic interest. * * *
* * * * * * *
(d) Definitions. As used in this part, and the
regulations thereunder, the term--
* * * * * * *
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011