Cite as: 506 U. S. 546 (1993)
Opinion of the Court
other rule applied to the calculation of basis for percentage depletion. After the minimum tax was enacted, the Treasury Department inserted a regulation about basis for percentage depletion where one would expect it: among the regulations implementing the minimum tax. That regulation, § 1.57-1(h)(3), directs us to § 1016, but unfortunately contains no correlative reference to the regulations under § 612.
Second, the Hills argue that excluding tangible costs from the adjusted basis of their mineral deposit interests would run counter to regulations specifying the inclusion of certain intangible costs. As we have already noted, 26 U. S. C. § 263(c) (1976 ed., Supp. V) grants taxpayers an option to deduct as expenses certain "intangible drilling and development costs." If a taxpayer chooses instead to capitalize those costs, the regulations require the taxpayer to sort the costs into two bins. Costs "represented by physical property" are recoverable through depreciation, either through adjustments to the bases of pre-existing items to which the costs relate, or through an initial entry in a new depreciation account. Treas. Reg. § 1.612-4(b)(2). Costs "not represented by physical property" are recoverable through depletion, as adjustments to the bases of the mineral deposit interests to which they relate. § 1.612-4(b)(1); see § 1.612-4(d) (if a taxpayer fails to elect to expense intangible costs correctly, "he shall be deemed to have elected to recover such costs through depletion to the extent that they are not represented by physical property, and through depreciation to the extent that they are represented by physical property"). Since these latter costs are added to depletable basis, the taxpayers argue, so should the tangible costs that are excluded altogether from the § 263(c) option. We fail to see the logic of this argument. To the extent that the regulation allowing intangible costs "not represented by physical property" to be added to a mineral deposit's basis deviates from general principles of basis allocation, we see no reason why
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