§611 — Allowance of deduction for depletion

77 cases·12 followed·10 distinguished·1 questioned·1 criticized·1 overruled·52 cited—16% support

Statute Text — 26 U.S.C. §611

(a)General rule

In the case of mines, oil and gas wells, other natural deposits, and timber, there shall be allowed as a deduction in computing taxable income a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case; such reasonable allowance in all cases to be made under regulations prescribed by the Secretary. For purposes of this part, the term “mines” includes deposits of waste or residue, the extraction of ores or minerals from which is treated as mining under section 613(c). In any case in which it is ascertained as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate (but not the basis for depletion) shall be revised and the allowance under this section for subsequent taxable years shall be based on such revised estimate.

(b)Special rules

(1)Leases

In the case of a lease, the deduction under this section shall be equitably apportioned between the lessor and lessee.

(2)Life tenant and remainderman

In the case of property held by one person for life with remainder to another person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant.

(3)Property held in trust

In the case of property held in trust, the deduction under this section shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.

(4)Property held by estate

In the case of an estate, the deduction under this section shall be apportioned between the estate and the heirs, legatees, and devisees on the basis of the income of the estate allocable to each.

(c)Cross reference

For other rules applicable to depreciation of improvements, see section 167.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.611-0 Regulatory authority
Treas. Reg. §Treas. Reg. §1.611-1 Allowance of deduction for depletion
Treas. Reg. §Treas. Reg. §1.611-1(a) Depletion of mines, oil and gas wells, other natural deposits, and timber—(1) In general.
Treas. Reg. §Treas. Reg. §1.611-1(b) Economic interest.
Treas. Reg. §Treas. Reg. §1.611-1(c) Special rules—(1) In general.
Treas. Reg. §Treas. Reg. §1.611-1(d) Definitions.
Treas. Reg. §Treas. Reg. §1.611-1(i) If under the trust instrument of local law the income of a trust computed without regard to depletion is to be distributed to a named beneficiary, the beneficiary is entitled to the deduction to the exclusion of the trustee.
Treas. Reg. §Treas. Reg. §1.611-2 Rules applicable to mines, oil and gas wells, and other natural deposits
Treas. Reg. §Treas. Reg. §1.611-2(a) §1.611-2(a)
Treas. Reg. §Treas. Reg. §1.611-2(b) §1.611-2(b)
Treas. Reg. §Treas. Reg. §1.611-2(c) §1.611-2(c)
Treas. Reg. §Treas. Reg. §1.611-2(d) Determination of fair market value of mineral properties, and improvements, if any.
Treas. Reg. §Treas. Reg. §1.611-2(e) Determination of the fair market value of mineral property by the present value method.
Treas. Reg. §Treas. Reg. §1.611-2(f) Revaluation of mineral property not allowed.
Treas. Reg. §Treas. Reg. §1.611-2(g) Statement to be attached to return when valuation, depletion, or depreciation of mineral property or improvements are claimed.
Treas. Reg. §Treas. Reg. §1.611-2(i) §1.611-2(i)
Treas. Reg. §Treas. Reg. §1.611-2(v) Maps showing the location of the tracts or leases and of the producing and abandoned wells, dry holes, and proven oil and gas lands (the maps should show depth, initial production, and date of completion of each well, etc.
Treas. Reg. §Treas. Reg. §1.611-2(x) Available geological information having a probable bearing on the oil and gas content; information with respect to edge water, water drive, bottom hole pressures, oil-gas ratio, porosity of reservoir rock, percentage of recovery, expected date of cessation of natural flow, decline in estimated potential, and characteristics similar to characteristics of other known fields.
Treas. Reg. §Treas. Reg. §1.611-3 Rules applicable to timber
Treas. Reg. §Treas. Reg. §1.611-3(a) Capital recoverable through depletion allowance in case of timber.
Treas. Reg. §Treas. Reg. §1.611-3(b) Computation of allowance for depletion of timber for taxable year.
Treas. Reg. §Treas. Reg. §1.611-3(c) Timber depletion accounts on books.
Treas. Reg. §Treas. Reg. §1.611-3(d) Aggregating timber and land for purposes of valuation and accounting.
Treas. Reg. §Treas. Reg. §1.611-3(e) Determination of quantity of timber.
Treas. Reg. §Treas. Reg. §1.611-3(f) Determination of fair market value of timber property.

77 Citing Cases

DIST. K.H. Company, LLC Employee Stock Ownership Plan, Petitioner · 2014

611(d)(1) and (2), 115 Stat. at 97, later amended sec. 402(g)(5), effective for years beginning after December 31, 2001. See also EGTRRA sec. 611(i), 115 Stat. at 100. Respondent concedes that URAA sec. 732(c) does not apply to plan years that began after December 31, 2001.

FOLLOWED Mitsubishi Cement Corporation & Subsidiaries, A Delaware Corporation, Petitioner · 2017

For each ofthe tax years in issue petitioner claimed a deduction for depletion pursuant to section 611 in connection with its mining ofcalcium carbonates at Cushenberry.

Santa Fe Pacific Gold Co. & Subsidiaries ex rel. Newmont USA Ltd. v. Commissioner 130 T.C. 299 · 2008

he permanent benefits of the percentage depletion method: (F) Depletion.— (i) In GENERAL. — The allowance for depletion with respect to any property placed in service in a taxable year beginning after December 31, 1989, shall be cost depletion under section 611. This requires an ACE adjustment for the difference between a taxpayer’s depletion deduction and the amount that would be allowed if the taxpayer calculated its depletion deduction using the cost depletion method. To the extent that both

James S. & Denise D. Goodfellow; Daniel R. & Claudia Goodfellow; and James B. & Nancy B. Goodfellow, Petitioners T.C. Memo. 2002-128 · 2002

d Denise D. Goodfellow $69,594 $28,546 Daniel R. and Claudia Goodfellow 57,887 23,729 James B. and Nancy B. Goodfellow -0- 2,858 We decide herein whether GBI had the requisite economic interest in certain unusable materials to deduct depletion under section 611. We hold it did not. Unless otherwise indicated, 9 section references are to the Internal Revenue Code in effect for the subject years. Rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT All facts were

Mitsubishi Cement Corporation & Subsidiaries, A Delaware Corporation, Petitioner · 2018

On petitioner's income tax returns for the years in issue it claimed deductions for depletion pursuant to section 611 in connection with its mining of calcium carbonates.

Bryan Rock Products, Inc. and Subsidiary, Petitioner T.C. Memo. 1997-51 · 1997

Discussion Section 611 provides for a reasonable allowance for depletion in the case of mines.

Leon A. Greenblatt, III & Leslie N. Jabine, Petitioners · 2024

Section 263 provides a deduction for intangible drilling costs (IDC). § 263(c). IDC includes costs for labor, fuel, repairs, hauling, and supplies which are used for a variety of purposes including the drilling, shooting, and cleaning of wells, preparation of the drilling of wells, and construction of physical structures necessar

TG Missouri Corporation f.k.a. TG (U.S.A.) Corporation, a Missouri Corporation, Petitioners 133 T.C. No. 13 · 2009

experimental expenditures that are paid or incurred by the taxpayer in connection with his trade or business, are not treated as expenses under section 174(a), an d .are "chargeable to capital account but not chargeable to property of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc .) or section 611 (relating to allowance for depletion) " .

Peter Ackerman & Joanne Leedom-Ackerman, Petitioners T.C. Memo. 2009-80 · 2009

In that ruling, the Internal Reve- nue Service (Service) concluded that the stockholders of a cap- tive mining company (mining company) that had been established as a cost company were entitled to certain depletion deductions under section 611 of the Internal Revenue Code of 1954 .

TG Missouri Corp. v. Commissioner 133 T.C. 278 · 2009

or experimental expenditures that are paid or incurred by the taxpayer in connection with his trade or business, are not treated as expenses under section 174(a), and are “chargeable to capital account but not chargeable to property of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion)”.

Timothy J. Burke, Petitioner T.C. Memo. 2005-297 · 2005

Petitioner, 3(...continued) (C) the deduction for charitable contributions provided in section 170, (D) the net operating loss deduction provided in section 172, (E) the additional itemized deductions for individuals provided in part VII of subchapter B (section 211 and following), and (F) the deduction for depletion under section 611 with respect to oil and gas wells.

Herbert C. Haynes, Inc., Petitioner T.C. Memo. 2004-185 · 2004

n of timber), sec. 1.631-1, Income Tax Regs. (creating an election to consider the cutting of timber as a sale or exchange); see also RLC Indus. Co. v. Commissioner, 98 T.C. 457 (1992) (analyzing taxpayer’s method of computing timber depletion under sec. 611), affd. 58 F.3d 413 (9th Cir. 1995). Neither party argued in its briefs that these code sections are dispositive of the issues presented in this case. Additionally, neither party addressed the interplay of these code sections with secs. 447

Steven J. & Peggy A. Roling, Petitioner · 2001

In the case of standing timber, the depletion must be computed solely upon the adjusted basis of the property. See sec. 1.611- 1(a), Income Tax Regs. The depletable basis applicable to timber is contained in section 1.611-3(a), Income Tax Regs. which - 13 - describes the cost basis provided by section 612, which, in turn, describes an "a

The Coca-Cola Company and Includible Subsidiaries, Petitioner 106 T.C. No. 1 · 1996

Section 611 allows a "reasonable allowance for depletion" in the case of oil and gas wells "according to the peculiar conditions in each case". Section 613(a) provides for a - 45 - percentage depletion deduction based upon a percentage of a taxpayer's "gross income from the property". Section 611(a) provides that reasonable depletion allowance in

Paul S. Mahoney, Petitioner T.C. Memo. 1996-206 · 1996

ovement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

Edward F. & Kathryn G. Houser, Jr., Petitioner T.C. Memo. 1996-206 · 1996

Coca-Cola Co. v. Commissioner 106 T.C. 1 · 1996

/ Section 611 allows a “reasonable allowance for depletion” in the case of oil and gas wells “according to the peculiar conditions in each case”. Section 613(a) provides for a percentage depletion deduction based upon a percentage of a taxpayer’s “gross income from the property”. Section 611(a) provides that reasonable depletion allowance in all case

Exxon Mobil Corporation and Affiliated Companies, f.k.a. Exxon Corporation and Affiliated Companies, Petitioners 102 T.C. No. 33 · 1994

Section 611 allows a "reasonable allowance for depletion" in the case of, inter alia, oil and gas wells, "according to.the peculiar conditions in each case". Section 613(a) provides for a percentage depletion deduction based upon a percentage of a taxpayer's "gross income from the property".7 While the statute is silent as to the definition of "gro

Exxon Corp. v. Commissioner 102 T.C. 721 · 1994

Section 611 allows a “reasonable allowance for depletion” in the case of, inter alia, oil and gas wells, “according to the peculiar conditions in each case”. Section 613(a) provides for a percentage depletion deduction based upon a percentage of a taxpayer’s “gross income from the property”. While the statute is silent as to the definition of “gros

Shamrock Oil & Gas Corp. v. Commissioner 35 T.C. 979 · 1961

RLC Industries Co. v. Commissioner 98 T.C. 457 · 1992

Louisiana Land & Exploration Co. v. Commissioner 90 T.C. 630 · 1988

Engle v. Commissioner 76 T.C. 915 · 1981

Glass v. Commissioner 76 T.C. 949 · 1981

Meyers v. Commissioner 66 T.C. 235 · 1976

Occidental Petroleum Corp. v. Commissioner 55 T.C. 115 · 1970

Mullins v. Commissioner 48 T.C. 571 · 1967

Warren v. Commissioner 40 T.C. 991 · 1963

Victory Sand & Concrete, Inc. v. Commissioner 61 T.C. 407 · 1974

Potts v. Commissioner 90 T.C. 995 · 1988

Gulf Oil Corp. v. Commissioner 86 T.C. 115 · 1986

McClelland v. Commissioner 83 T.C. 958 · 1984

McLean v. Commissioner 54 T.C. 569 · 1970

Dow Chemical Co. v. Commissioner 51 T.C. 669 · 1969

Reich v. Commissioner 52 T.C. 700 · 1969

Campbell v. Commissioner 41 T.C. 91 · 1963

Petersen v. Commissioner 38 T.C. 137 · 1962

Merritt v. Commissioner 39 T.C. 257 · 1962

Transco Exploration Co. v. Commissioner 95 T.C. 373 · 1990

Webb Export Corp. v. Commissioner 91 T.C. 131 · 1988

Miller v. Commissioner 85 T.C. 1064 · 1985

Howell v. Commissioner 77 T.C. 916 · 1981

Davis v. Commissioner 74 T.C. 881 · 1980

Brountas v. Commissioner 73 T.C. 491 · 1979

Weaver v. Commissioner 72 T.C. 594 · 1979

Julia R. & Estelle L. Foundation, Inc. v. Commissioner 70 T.C. 1 · 1978

Carborundum Co. v. Commissioner 70 T.C. 59 · 1978

C. J. Langenfelder & Son, Inc. v. Commissioner 69 T.C. 378 · 1977

Ayers Materials Co. v. Commissioner 62 T.C. 557 · 1974

World Airways, Inc. v. Commissioner 62 T.C. 786 · 1974

Mesa Petroleum Co. v. Commissioner 58 T.C. 374 · 1972

Ridley v. Commissioner 58 T.C. 439 · 1972

North Carolina Granite Corp. v. Commissioner 56 T.C. 1281 · 1971

Greenland Contractors v. Renegotiation Board 54 T.C. 177 · 1970

Adkins v. Commissioner 51 T.C. 957 · 1969

Ramey v. Commissioner 47 T.C. 363 · 1967

North Carolina Granite Corp. v. Commissioner 43 T.C. 149 · 1964

Island Creek Coal Co. v. Commissioner 43 T.C. 234 · 1964

Day Mines, Inc. v. Commissioner 42 T.C. 337 · 1964

Sexton v. Commissioner 42 T.C. 1094 · 1964

Estate of Nissen v. Commissioner 41 T.C. 522 · 1964

Mayrath v. Commissioner 41 T.C. 582 · 1964

United Salt Corp. v. Commissioner 40 T.C. 359 · 1963

Central Commercial Co. v. Commissioner 40 T.C. 901 · 1963

Bolling v. Commissioner 37 T.C. 754 · 1962

Legg v. Commissioner 39 T.C. 30 · 1962

Cooper v. Commissioner 39 T.C. 253 · 1962

W. D. Haden Co. v. Commissioner 37 T.C. 512 · 1961

Koons v. Commissioner 35 T.C. 1092 · 1961

Utah Alloy Ores, Inc. v. Commissioner 33 T.C. 917 · 1960

Halquist v. Commissioner 33 T.C. 304 · 1959

Pacific Cement & Aggregates, Inc. v. Commissioner 31 T.C. 136 · 1958

Davis v. Commissioner 17 T.C. 549 · 1951

United States v. McElroy 587 F.3d 73 · Cir.

Mark Boyce v. Soundview Technology Group, Inc. (Formerly Known as Wit Capital Group, Inc.), Docket No. 05-1685-Cv 464 F.3d 376 · Cir.

United States v. Senyszyn 338 F. App'x 201 · Cir.