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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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