Court Opinion

ID: 4607889
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:41:37.167438+00
Date Added: 2024-06-11T07:53:36.619620
License: Public Domain

CALVIN COAL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Clavin Coal Co. v. CommissionerDocket No. 14243.United States Board of Tax Appeals10 B.T.A. 397; 1928 BTA LEXIS 4122; January 30, 1928, Promulgated *4122  1.  Proper allowance for depletion for the year 1921 determined.  2.  The evidence fails to establish that petitioner is entitled to a deduction for 1921 by reason of an alleged loss of coal in place.  E. F. Hunter, C.P.A., for the petitioner.  Bruce A. Low, Esq., for the respondent.  LOVE *397  This proceeding is for the redetermination of a deficiency in income and profits tax for the calendar year 1921 in the amount of $3,402.01.  The petitioner alleges that the Commissioner erred, first, in determining that it was entitled to a depletion deduction of $359.99, whereas, it is alleged, the proper deduction was $598.54; and, second, in disallowing as a deduction for the year 1921 the amount of $11,061.70, which, it is alleged, represents a loss incurred in 1921 by reason of the abandonment of certain coal in place.  FINDINGS OF FACT.  Petitioner is a Texas corporation with its principal place of business at Calvin, Bastrop County.  It is and was during 1921 and for several years prior thereto engaged in the mining of lignite coal.  *398  Prior to the year 1920 petitioner acquired a tract of land of about 453 acres containing coal. *4123  In 1910 mining was begun in Mine No. 1, through Shaft No. 1.  There were approximately 120 acres in the block that was being mined through Shaft No. 1, and there were two workable seams in this area, to wit, Seam No. 4, which lay close to the surface and was about 4 1/2 feet thick, and Seam No. 5, which was about 60 feet below Seam No. 4 and was about 10 feet thick.  The arm-and-pillar method of mining was used, that is, arms about 10 feet wide were extended from main leads and pillars of coal about 20 feet wide were left standing between the arms as supports for the roof of the mine.  After the arms had been extended to the boundary of the seam, or as far as it was profitable to go, the work was retraced by mining out the pillars theretofore standing.  Thus, in mining the coal from the arms, approximately one-third thereof was recovered, two-thirds remaining as pillars.  Up to and including 1921, practically none of the pillars had been removed.  Prior to May, 1919, all of the coal mined was removed through Shaft No. 1.  On May 12, 1919, the mine was flooded.  The working areas were filled with water and when the water was pumped out of those areas, the sandy earth gave way and*4124  cracked, causing the mine to cave in to the surface at different places.  A month or two later there was another flood that caused the shaft to cave in.  After the flood of May, 1919, the petitioner never took any coal out of the mine through Shaft No. 1, but a little was removed through a slope that was sunk in 1919.  Petitioner had hopes of recovering the coal in the mine until 1921, when after another flood, it figured that it had lost the whole mine and abandoned its efforts to recover the coal.  Upon audit of petitioner's return for 1921, the Commissioner determined that petitioner was entitled to a deduction for depletion in the amount of $359.99 and he further determined that petitioner was not entitled to deduct any amount from gross income for a loss alleged to have been incurred by the flooding of the mine and consequently, restored to income the amount of $31,737.09 which had been deducted on account thereof.  OPINION.  LOVE: The Commissioner concedes that he was in error in determining the depletion allowance for 1921, and in this respect admits the correctness of petitioner's allegation.  Accordingly the proper allowance for depletion is $598.54, which amount should*4125  be reflected in determining taxable income for 1921.  The remaining issue is whether petitioner is entitled to a deduction of $11,061.70 for the year 1921 on account of a loss of coal in place.  *399  From the evidence adduced, however, we are unable to determine the cost, the March 1, 1913, value or amount of coal in place abandoned in 1921.  Obviously, without these essential elements we can not determine the amount of the loss, if any, assuming that under the facts as stated a deductible loss was otherwise sustained under section 234(a)(4) of the Revenue Act of 1921, and in this connection we pass no opinion.  The Commissioner's determination in this respect is, therefore, approved.  Judgment will be entered on 15 days' notice, under Rule 50.