Sunoco, Inc. and Subsidiaries - Page 14

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             costs would be deducted from gross income in computing                   
             the taxpayer's taxable income.  See sec. 616(a).                         
                  Section 616(a) and (b) provides as follows:                         

                       SEC. 616(a).  In General.-–Except as                           
                  provided in subsection (b), there shall be                          
                  allowed as a deduction in computing taxable                         
                  income all expenditures paid or incurred during                     
                  the taxable year for the development of a mine                      
                  or other natural deposit (other than an oil or                      
                  gas well) if paid or incurred after the                             
                  existence of ores or minerals in commercially                       
                  marketable quantities has been disclosed.  This                     
                  section shall not apply to expenditures for the                     
                  acquisition or improvement of property of a                         
                  character which is subject to the allowance for                     
                  depreciation provided in section 167, but                           
                  allowances for depreciation shall be considered,                    
                  for purposes of this section, as expenditures.                      
                       (b) Election of Taxpayer.-–At the election                     
                  of the taxpayer, made in accordance with regula-                    
                  tions prescribed by the Secretary, expenditures                     
                  described in subsection (a) paid or incurred                        
                  during the taxable year shall be treated as                         
                  deferred expenses and shall be deductible on a                      
                  ratable basis as the units of produced ores or                      
                  minerals benefited by such expenditures are sold.                   
                  In the case of such expenditures paid or incurred                   
                  during the development stage of the mine or                         
                  deposit, the election shall apply only with                         
                  respect to the excess of such expenditures during                   
                  the taxable year over the net receipts during the                   
                  taxable year from the ores or minerals produced                     
                  from such mine or deposit.  The election under                      
                  this subsection, if made, must be for the total                     
                  amount of such expenditures, or the total amount                    
                  of such excess, as the case may be, with respect                    
                  to the mine or deposit, and shall be binding for                    
                  such taxable year.                                                  

                  The applicable treatment of overburden removal costs,               
             either as development costs or as production costs,                      

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Last modified: May 25, 2011