Stouts Mountain Coal Co. v. Commissioner

4 B.T.A. 1292, 1926 BTA LEXIS 2038

Opinion

OPINION.

Smith:

The taxing statute permits a taxpayer to deduct from gross income—

In the case of mines, * * * a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case, based upon cost including cost of development not otherwise deducted: * * * Section 234 (a) (9), Revenue Act of 1918.

A reasonable allowance must be made for depletion in accordance with the facts in a given case. At the time the petitioner started operations, and during the year 1920, it believed that the recoverable tons of coal in its property were 400,000. It developed, however, prior to the close of its fiscal year ended October 31, 1921, that the recoverable tons were in all not in excess of 75,000. The depletion deduction for such year is the undepleted cost of the coal in place at the beginning of such year; in other words, the undepleted cost on November 1, 1920, should be spread over the number of tons of coal removed during the fiscal year ended October 31, 1921. Only in this way will the petitioner be allowed to recover from gross income, as a depletion deduction during the life of the mine, the undepleted cost of the coal in place at the beginning of the taxable year.

Order of redetermmation will he entered on 15 days’ notice, under Bule 50.