548
Opinion of the Court
principles of basis allocation, if such it be, should force the Government, or this Court, to create another deviation. Pp. 561-564.
945 F. 2d 1529, reversed.
Souter, J., delivered the opinion for a unanimous Court.
Kent L. Jones argued the cause for the United States. With him on the briefs were Solicitor General Starr, Acting Assistant Attorney General Bruton, Deputy Solicitor General Wallace, Ann Belanger Durney, and Charles Bricken.
Richard B. Robinson argued the cause for respondents. With him on the brief was Robert A. Wherry, Jr.*
Justice Souter delivered the opinion of the Court.
Under §§ 56 and 57(a)(8) of the Internal Revenue Code of 1954, 26 U. S. C. §§ 56, 57(a)(8) (1976 ed.), a taxpayer must pay a "minimum tax" on the excess of the allowable depletion deduction for an interest in a mineral deposit over the taxpayer's adjusted basis for that interest. The question presented here is whether the term "adjusted basis," as used in § 57(a)(8), includes certain depreciable drilling and development costs identified in § 1.612-4(c)(1) of the Treasury Department regulations. We hold that the term does not cover such costs.
I
In 1981 and 1982, respondents William F. and Lola E. Hill were in the oil and gas exploration and production business, and, on their federal income tax returns for those respective years, they deducted $439,884 and $371,636 for depletion with respect to their interests in oil and gas deposits. Under 26 U. S. C. § 57(a)(8) (1976 ed.), the excess of the allowable depletion deduction for each of the deposit interests over the interest's "adjusted basis" is an "ite[m] of tax prefer-*Timothy B. Dyk filed a brief for the National Coal Association et al. as amicus curiae urging affirmance.
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