§631 — Gain or loss in the case of timber, coal, or domestic iron ore
40 cases·7 followed·3 distinguished·1 questioned·29 cited—18% support
Statute Text — 26 U.S.C. §631
If the taxpayer so elects on his return for a taxable year, the cutting of timber (for sale or for use in the taxpayer’s trade or business) during such year by the taxpayer who owns, or has a contract right to cut, such timber (providing he has owned such timber or has held such contract right for a period of more than 1 year) shall be considered as a sale or exchange of such timber cut during such year. If such election has been made, gain or loss to the taxpayer shall be recognized in an amount equal to the difference between the fair market value of such timber, and the adjusted basis for depletion of such timber in the hands of the taxpayer. Such fair market value shall be the fair market value as of the first day of the taxable year in which such timber is cut, and shall thereafter be considered as the cost of such cut timber to the taxpayer for all purposes for which such cost is a necessary factor. If a taxpayer makes an election under this subsection, such election shall apply with respect to all timber which is owned by the taxpayer or which the taxpayer has a contract right to cut and shall be binding on the taxpayer for the taxable year for which the election is made and for all subsequent years, unless the Secretary, on showing of undue hardship, permits the taxpayer to revoke his election; such revocation, however, shall preclude any further elections under this subsection except with the consent of the Secretary. For purposes of this subsection and subsection (b), the term “timber” includes evergreen trees which are more than 6 years old at the time severed from the roots and are sold for ornamental purposes.
In the case of the disposal of timber held for more than 1 year before such disposal, by the owner thereof under any form or type of contract by virtue of which such owner either retains an economic interest in such timber or makes an outright sale of such timber, the difference between the amount realized from the disposal of such timber and the adjusted depletion basis thereof, shall be considered as though it were a gain or loss, as the case may be, on the sale of such timber. In determining the gross income, the adjusted gross income, or the taxable income of the lessee, the deductions allowable with respect to rents and royalties shall be determined without regard to the provisions of this subsection. In the case of disposal of timber with a retained economic interest, the date of disposal of such timber shall be deemed to be the date such timber is cut, but if payment is made to the owner under the contract before such timber is cut the owner may elect to treat the date of such payment as the date of disposal of such timber. For purposes of this subsection, the term “owner” means any person who owns an interest in such timber, including a sublessor and a holder of a contract to cut timber.
In the case of the disposal of coal (including lignite), or iron ore mined in the United States, held for more than 1 year before such disposal, by the owner thereof under any form of contract by virtue of which such owner retains an economic interest in such coal or iron ore, the difference between the amount realized from the disposal of such coal or iron ore and the adjusted depletion basis thereof plus the deductions disallowed for the taxable year under section 272 shall be considered as though it were a gain or loss, as the case may be, on the sale of such coal or iron ore. If for the taxable year of such gain or loss the maximum rate of tax imposed by this chapter on any net capital gain is less than such maximum rate for ordinary income, such owner shall not be entitled to the allowance for percentage depletion provided in section 613 with respect to such coal or iron ore. This subsection shall not apply to income realized by any owner as a co-adventurer, partner, or principal in the mining of such coal or iron ore, and the word “owner” means any person who owns an economic interest in coal or iron ore in place, including a sublessor. The date of disposal of such coal or iron ore shall be deemed to be the date such coal or iron ore is mined. In determining the gross income, the adjusted gross income, or the taxable income of the lessee, the deductions allowable with respect to rents and royalties shall be determined without regard to the provisions of this subsection. This subsection shall have no application, for purposes of applying subchapter G, relating to corporations used to avoid income tax on shareholders (including the determinations of the amount of the deductions under section 535(b)(6) or section 545(b)(5)). This subsection shall not apply to any disposal of iron ore or coal—
to a person whose relationship to the person disposing of such iron ore or coal would result in the disallowance of losses under section 267 or 707(b), or
to a person owned or controlled directly or indirectly by the same interests which own or control the person disposing of such iron ore or coal.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.631-1 Election to consider cutting as sale or exchange
- Treas. Reg. §Treas. Reg. §1.631-1(a) Effect of election.
- Treas. Reg. §Treas. Reg. §1.631-1(b) Who may make election.
- Treas. Reg. §Treas. Reg. §1.631-1(c) Manner of making election.
- Treas. Reg. §Treas. Reg. §1.631-1(d) Computation of gain or loss under the election.
- Treas. Reg. §Treas. Reg. §1.631-1(e) Computation of subsequent gain or loss.
- Treas. Reg. §Treas. Reg. §1.631-2 Gain or loss upon the disposal of timber under cutting contract
- Treas. Reg. §Treas. Reg. §1.631-2(a) In general.
- Treas. Reg. §Treas. Reg. §1.631-2(b) Determination of date of disposal.
- Treas. Reg. §Treas. Reg. §1.631-2(c) Manner and effect of election to treat date of payment as the date of disposal.
- Treas. Reg. §Treas. Reg. §1.631-2(d) Payments received in advance of cutting.
- Treas. Reg. §Treas. Reg. §1.631-2(e) Other rules for application of section.
- Treas. Reg. §Treas. Reg. §1.631-3 Gain or loss upon the disposal of coal or domestic iron ore with a retained economic interest
- Treas. Reg. §Treas. Reg. §1.631-3(a) In general.
- Treas. Reg. §Treas. Reg. §1.631-3(b) §1.631-3(b)
- Treas. Reg. §Treas. Reg. §1.631-3(c) Payments received in advance of mining.
- Treas. Reg. §Treas. Reg. §1.631-3(d) Nonapplication of section.
- Treas. Reg. §Treas. Reg. §1.631-3(e) Special rules with regard to iron ore.
40 Citing Cases
d and claimed. Petitioner concedes that sec. 631(a) treatment is not available based on the fact that it did not have a sec. 631(a) election in place during the years in issue. For the 1992 taxable year, one of petitioner’s subsidiaries made a valid sec. 631 election, but the subsidiary was liquidated at the end of the 1992 calendar year. With that exception, petitioner and its subsidiaries were not entitled to sec. 631 treatment for the taxable years 1992 through 1995. - 5 - had sold the damage
2269.11 11 Petitioners’ new position in 1987 that Burndy-Japan was a CFC of Burndy-US coincided with a change in the tax law effective for tax years beginning in 1987. See sec. 1204 of the Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514, 100 Stat. 2532. Petitioners do not explain why they began to contend Burndy-Japan was a CF
2269.11 11 Petitioners’ new position in 1987 that Burndy-Japan was a CFC of Burndy-US coincided with a change in the tax law effective for tax years beginning in 1987. See sec. 1204 of the Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514, 100 Stat. 2532. Petitioners do not explain why they began to contend Burndy-Japan was a CF
2085, 2269. In reversing our grant of summary judgment on this issue and remanding the case for determination of gift tax liability, the Court of Appeals cited and quoted from Estate of Davis v. Commissioner, supra, in support of its reasoning. In Estate of Davis, the Court rejected the Government’s argument that no discount for
asoned that the corporation's ability to avoid taxes upon liquidation rendered the projected liability so speculative as to be irrelevant. Estate of Piper, 72 T.C. at 1087. The repeal of those provisions, in the Tax Reform Act of 1986, P.L. 99-514, §§ 631-633, 100 Stat. 2269- 2282, as reprinted in 1986-3 C.B. (Vol. 1) 186-199, did not foreclose the possibility of avoiding capital gains taxes at the corporate level upon sale of all assets. A subchapter C corporation can convert to a corporation d
2269. Specifically, petitioner contends that the amendments made by the TRA to sections 336 and 337 repealed the General Utilities doctrine.8 Petitioner states that prior to the effective date of TRA, the corporation could have liquidated completely and distributed the property and cash to her, or to any other individual or enti
distribution of the last two condominium units to petitioner, in consideration of 12For an example of a mandatory requirement for filing a form in order to obtain specified tax treatment in a "one month" liquidation, see former sec. 333, repealed by sec. 631(e)(3) of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, 2273. - 21 - his taking care of the corporate liabilities and recovering his own investment, manifested WSAI’s intention to liquidate, and that that intention was carried o