Court Opinion

ID: 4475917
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:45.329849+00
Date Added: 2024-06-11T08:49:00.746307
License: Public Domain

Naum, /., dissenting: The applicable regulations, quoted in the majority opinion, provide that the “absence of a clear indication” in the return of an election to deduct as expenses intangible drilling and development costs “shall be deemed” to be an election to recover such costs through depletion and depreciation, and that such election is binding for all subsequent years. It appears beyond reasonable dispute that the return herein did not contain a “clear indication” to deduct the expenses in question, with the consequence, explicitly set forth in the regulations, that such costs must be recovered through depletion and depreciation, and this means simply that they must be capitalized. The result may not be avoided by stating the question, as is done in the majority opinion, in terms of “whether what petitioner did * * * constituted an irrevocable election not to expense its intangible drilling and development costs.” The issue is not whether petitioner made an irrevocable election “not to expense” the costs in question. Eather the issue is, plainly stated in the regulations, whether there is a “clear indication” in petitioner’s return to deduct such expenses; and in the absence of any such “clear indication,” the regulations spell out the consequences which must follow. Nor may the result be avoided by the theory advanced in the concurring opinion, which resorts to extrinsic evidence to determine whether petitioner made an election to expense the intangible drilling and development costs. The regulations unambiguously require that the election to expense be clearly indicated “in such [petitioner’s] return.” Neither the majority opinion nor the concurring opinion suggests that the Commissioner was without power to promulgate such regulations, and I know of no sound reason why they should be held invalid. TURNER, J., agrees with this dissent.