Court Opinion

ID: 9452372
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:39:07.593282+00
Date Added: 2024-06-11T17:33:11.723033
License: Public Domain

ROBERT L. TAYLOR, District Judge
(dissenting).
In all deference, I feel that the judgment of the District Court should be affirmed. The Supreme Court has said that the depletion allowance is “solely a matter of legislative grace.” Helvering v. Bankline Oil Co., 303 U.S. 362, 363, 58 S.Ct. 616; Parsons v. Smith, 359 U.S. 215, 219, 79 S.Ct. 656; Paragon Jewel Coal Co. v. Commissioner of Internal Revenue, 380 U.S. 624, 631, 85 S.Ct. 1207, 14 L.Ed.2d 116. The formula proposed by appellant and adopted by the Court for arriving at a cost basis for the depletion allowance would open the way for recovery of the full cost of many acres through the stripping of a few. The opportunities thus presented for profiting at the expense of the public would be abundant. I think no such result was intended by the statute and regulations. As the Supreme Court said in Paragon Jewel Coal Co. v. Commissioner of Internal Revenue, supra:
“This Court has often said that the purpose of the allowance for depletion is to compensate the owner of wasting mineral assets for the part exhausted in production, so that when the minerals are gone, the owner’s capital and his capital assets remain unimpaired. * * *” (Emphasis added.)
See also Mertens, Law of Federal Income Taxation, Vol. 4, Sec. 24.03:
“(a) Cost Depletion. Cost depletion is based upon the cost * * * value of the particular deposit to the taxpayer. The purpose of such depletion is to return to the taxpayer free of tax that portion of the cost attributable to the amount of mineral or other natural resource exhausted or used up in earning the income on which he is taxed during the particular taxable year * * (Emphasis added.)
I think that the District Court properly apprehended and decided the issues in this case and that the cause should be affirmed for the reasons stated in its opinion. Beaver Dam Coal Company v. United States, 235 F.Supp. 106 (D.C.W.D. Ky.)