Internal Revenue Code:Sec. 614. Definition of property
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter I - Natural Resources
PART I - DEDUCTIONS
Statute
Sec. 614. Definition of property
(a) General rule
For the purpose of computing the depletion allowance in the case
of mines, wells, and other natural deposits, the term ''property''
means each separate interest owned by the taxpayer in each mineral
deposit in each separate tract or parcel of land.
(b) Special rules as to operating mineral interests in oil and gas
wells or geothermal deposits
In the case of oil and gas wells or geothermal deposits -
(1) In general
Except as otherwise provided in this subsection -
(A) all of the taxpayer's operating mineral interests in a
separate tract or parcel of land shall be combined and treated
as one property, and
(B) the taxpayer may not combine an operating mineral
interest in one tract or parcel of land with an operating
mineral interest in another tract or parcel of land.
(2) Election to treat operating mineral interests as separate
properties
If the taxpayer has more than one operating mineral interest in
a single tract or parcel of land, he may elect to treat one or
more of such operating mineral interests as separate properties.
The taxpayer may not have more than one combination of operating
mineral interests in a single tract or parcel of land. If the
taxpayer makes the election provided in this paragraph with
respect to any interest in a tract or parcel of land, each
operating mineral interest which is discovered or acquired by the
taxpayer in such tract or parcel of land after the taxable year
for which the election is made shall be treated -
(A) if there is no combination of interests in such tract or
parcel, as a separate property unless the taxpayer elects to
combine it with another interest, or
(B) if there is a combination of interests in such tract or
parcel, as part of such combination unless the taxpayer elects
to treat it as a separate property.
(3) Certain unitization or pooling arrangements
(A) In general
Under regulations prescribed by the Secretary, if one or more
of the taxpayer's operating mineral interests participate,
under a voluntary or compulsory unitization or pooling
agreement, in a single cooperative or unit plan of operation,
then for the period of such participation -
(i) they shall be treated for all purposes of this subtitle
as one property, and
(ii) the application of paragraphs (1), (2), and (4) in
respect of such interests shall be suspended.
(B) Limitation
Subparagraph (A) shall apply to a voluntary agreement only if
all the operating mineral interests covered by such agreement -
(i) are in the same deposit, or are in 2 or more deposits
the joint development or production of which is logical from
the standpoint of geology, convenience, economy, or
conservation, and
(ii) are in tracts or parcels of land which are contiguous
or in close proximity.
(C) Special rule in the case of arrangements entered into a
taxable years beginning before January 1, 1964
If -
(i) two or more of the taxpayer's operating mineral
interests participate under a voluntary or compulsory
unitization or pooling agreement entered into in any taxable
year beginning before January 1, 1964, in a single
cooperative or unit plan of operation,
(ii) the taxpayer, for the last taxable year beginning
before January 1, 1964, treated such interests as two or more
separate properties, and
(iii) it is determined that such treatment was proper under
the law applicable to such taxable year,
such taxpayer may continue to treat such interests in a
consistent manner for the period of such participation.
(4) Manner, time, and scope of election
(A) Manner and time
Any election provided in paragraph (2) shall be made for each
operating mineral interest, in the manner prescribed by the
Secretary by regulations, not later than the time prescribed by
law for filing the return (including extensions thereof) for
whichever of the following taxable years is the later: The
first taxable year beginning after December 31, 1963, or the
first taxable year in which any expenditure for development or
operation in respect of such operating mineral interest is made
by the taxpayer after the acquisition of such interest.
(B) Scope
Any election under paragraph (2) shall be for all purposes of
this subtitle and shall be binding on the taxpayer for all
subsequent taxable years.
(5) Treatment of certain properties
If, on the day preceding the first day of the first taxable
year beginning after December 31, 1963, the taxpayer has any
operating mineral interests which he treats under subsection (d)
of this section (as in effect before the amendments made by the
Revenue Act of 1964), such treatment shall be continued and shall
be deemed to have been adopted pursuant to paragraphs (1) and (2)
of this subsection (as amended by such Act).
(c) Special rules as to operating mineral interests in mines
(1) Election to aggregate separate interests
Except in the case of oil and gas wells and geothermal
deposits, if a taxpayer owns two or more separate operating
mineral interests which constitute part or all of an operating
unit, he may elect (for all purposes of this subtitle) -
(A) to form an aggregation of, and to treat as one property,
all such interests owned by him which comprise any one mine or
any two or more mines; and
(B) to treat as a separate property each such interest which
is not included within an aggregation referred to in
subparagraph (A).
For purposes of this paragraph, separate operating mineral
interests which constitute part or all of an operating unit may
be aggregated whether or not they are included in a single tract
or parcel of land and whether or not they are included in
contiguous tracts or parcels. For purposes of this paragraph, a
taxpayer may elect to form more than one aggregation of operating
mineral interests within any one operating unit; but no
aggregation may include any operating mineral interest which is a
part of a mine without including all of the operating mineral
interests which are a part of such mine in the first taxable year
for which the election to aggregate is effective, and any
operating mineral interest which thereafter becomes a part of
such mine shall be included in such aggregation.
(2) Election to treat a single interest as more than one property
Except in the case of oil and gas wells and geothermal
deposits, if a single tract or parcel of land contains a mineral
deposit which is being extracted, or will be extracted by means
of two or more mines for which expenditures for development or
operation have been made by the taxpayer, then the taxpayer may
elect to allocate to such mines, under regulations prescribed by
the Secretary, all of the tract or parcel of land and of the
mineral deposit contained therein, and to treat as a separate
property that portion of the tract or parcel of land and of the
mineral deposit so allocated to each mine. A separate property
formed pursuant to an election under this paragraph shall be
treated as a separate property for all purposes of this subtitle
(including this paragraph). A separate property so formed may,
under regulations prescribed by the Secretary, be included as a
part of an aggregation in accordance with paragraphs (1) and (3).
The election provided by this paragraph may not be made with
respect to any property which is a part of an aggregation formed
by the taxpayer under paragraph (1) except with the consent of
the Secretary.
(3) Manner and scope of election
The elections provided by paragraphs (1) and (2) shall be made,
in accordance with regulations prescribed by the Secretary, not
later than the time prescribed for filing the return (including
extensions thereof) for the first taxable year -
(A) in which, in the case of an election under paragraph (1),
any expenditure for development or operation in respect of the
separate operating mineral interest is made by the taxpayer
after the acquisition of such interest, or
(B) in which, in the case of an election under paragraph (2),
expenditures for development or operation of more than one mine
in respect of a property are made by the taxpayer after the
acquisition of the property.
An election made under paragraph (1) or (2) for a taxable year
shall be binding upon the taxpayer for such year and all
subsequent taxable years, except that the Secretary may consent
to a different treatment of any interest with respect to which an
election has been made.
(d) Operating mineral interests defined
For purposes of this section, the term ''operating mineral
interest'' includes only an interest in respect of which the costs
of production of the mineral are required to be taken into account
by the taxpayer for purposes of computing the taxable income
limitation provided for in section 613, or would be so required if
the mine, well, or other natural deposit were in the production
stage.
(e) Special rule as to nonoperating mineral interests
(1) Aggregation of separate interests
If a taxpayer owns two or more separate nonoperating mineral
interests in a single tract or parcel of land or in two or more
adjacent tracts or parcels of land, the Secretary shall, on
showing by the taxpayer that a principal purpose is not the
avoidance of tax, permit the taxpayer to treat (for all purposes
of this subtitle) all such mineral interests in each separate
kind of mineral deposit as one property. If such permission is
granted for any taxable year, the taxpayer shall treat such
interests as one property for all subsequent taxable years unless
the Secretary consents to a different treatment.
(2) Nonoperating mineral interests defined
For purposes of this subsection, the term ''nonoperating
mineral interests'' includes only interests which are not
operating mineral interests.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 210; Pub. L. 85-866, title I,
Sec. 37(a)-(d), Sept. 2, 1958, 72 Stat. 1633-1637; Pub. L. 88-272,
title II, Sec. 226(a), (b), Feb. 26, 1964, 78 Stat. 94, 96; Pub. L.
94-455, title XIX, Sec. 1901(a)(87)(A)(i), (B), (C),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1779, 1834; Pub. L. 95-618,
title IV, Sec. 403(a)(2)(C), (D), Nov. 9, 1978, 92 Stat. 3204; Pub.
L. 101-508, title XI, Sec. 11522(b)(2), Nov. 5, 1990, 104 Stat.
1388-486.)
References in Text
REFERENCES IN TEXT
The Revenue Act of 1964, referred to in subsec. (b)(5), is Pub.
L. 88-272, Feb. 26, 1964, 78 Stat. 19. For complete classification
of this Act to the Code, see Short Title of 1964 Amendments note
set out under section 1 of this title and Tables.
Miscellaneous
AMENDMENTS
1990 - Subsec. (d). Pub. L. 101-508 substituted ''taxable
income'' for ''50 percent''.
1978 - Subsec. (b). Pub. L. 95-618, Sec. 403(a)(2)(C), inserted
''or geothermal deposits'' after ''gas wells'' in heading and
introductory provisions.
Subsec. (c). Pub. L. 95-618, Sec. 403(a)(2)(D), substituted ''oil
and gas wells and geothermal deposits'' for ''oil and gas wells''
wherever appearing.
1976 - Subsecs. (b)(3)(A), (4)(A), (e). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out ''or his delegate'' after ''Secretary''.
Subsec. (c)(2). Pub. L. 94-455, Sec. 1901(a)(87)(B),
1906(b)(13)(A), struck out ''or his delegate'' after ''Secretary''
wherever appearing and '', but the provisions of paragraph (4)
shall not apply with respect to such separate property'' after ''in
accordance with paragraphs (1) and (3)''.
Subsec. (c)(3). Pub. L. 94-455, Sec. 1901(a)(87)(C), among other
changes, struck out references to the first taxable year beginning
after Dec. 31, 1957, and provisions relating to elections for
taxable years beginning before Jan. 1, 1958, relating to election
after final regulations, and relating to statute of limitations.
Subsec. (c)(4). Pub. L. 94-455, Sec. 1901(a)(87)(A)(i), struck
out par. (4) which related to a special rule as to deductions under
section 615(a) of this title prior to aggregation.
1964 - Subsec. (b). Pub. L. 88-272, Sec. 226(a), amended subsec.
(b) generally, and among other changes, substituted provisions
stating that except as otherwise provided, all of the taxpayer's
operating mineral interests in a separate tract or parcel of land
will be combined and treated as one property, that the taxpayer may
not combine any operating mineral interest in one tract or parcel
of land with an operating mineral interest in another tract or
parcel of land, that if he has more than one operating mineral
interest in a single tract of land he may elect to treat one or
more of such interests as separate properties, limited, however, to
one combination of interests in a single tract of land, and
providing, in the event the election in par. (2) is made with
respect to any tract of land, for the treatment of interests
discovered or acquired by the taxpayer in such a tract after the
taxable year for which the election is made, for provisions which
permitted a taxpayer who owned two or more separate operating
mineral interests which constituted all or a part of an operating
unit, to elect to form one aggregation and treat as one property
any two or more of these interests, treating as separate properties
any interests which he did not include in the one aggregation, to
aggregate separate interests whether or not in a single tract of
land, or contiguous tracts of land, and which forbade him to form
more than one aggregation within a single operating unit, inserted
provisions in par. (3) relating to unitization or pooling
arrangements, and in par (5), providing that if the taxpayer has
operating mineral interests on the day preceding the first day of
the first taxable year beginning after Dec. 31, 1963, which he
treats under subsec. (d) of this section as in effect before
amendment by Pub. L. 88-272, he shall continue such treatment and
it shall be deemed adopted pursuant to pars. (1) and (2) of this
subsection, and struck out provisions defining ''operating mineral
interests'', and providing for termination of election with respect
to mines, excepting oil and gas wells. For definition of
''operating mineral interests'', see subsec. (d) of this section.
Subsec. (c). Pub. L. 88-272, Sec. 226(b)(1), (2), struck out par.
(5) which defined operating mineral interests, and ''1958'' before
''Special rules'' in heading.
Subsec. (d). Pub. L. 88-272, Sec. 226(b)(3), amended subsec. (d)
generally, substituting the definition of operating mineral
interests, for provisions relating to the 1939 Code treatment
respecting operating mineral interest in case of oil and gas wells.
Subsec. (e)(2). Pub. L. 88-272, Sec. 226(b)(4), struck out
''within the meaning of subsection (b)(3)'' at end.
1958 - Subsec. (b)(4). Pub. L. 85-866, Sec. 37(a), added par.
(4).
Subsecs. (c) to (e). Pub. L. 85-866, Sec. 37(b)-(d), added
subsecs. (c) and (d), redesignated former subsec. (c) as (e), and
substituted in first sentence of par. (1) ''or in two or more
adjacent tracts'' for ''or in two or more contiguous tracts'' and
''shall, on showing by the taxpayer that a principal purpose is not
the avoidance of tax, permit the taxpayer to treat (for all
purposes of this subtitle) all such mineral interests in each
separate kind of mineral deposit as one property'' for ''may, on
showing of undue hardship, permit the taxpayer to treat (for all
purposes of this subtitle) all such mineral interests as one
property''.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to taxable years
beginning after Dec. 31, 1990, see section 11522(c) of Pub. L.
101-508, set out as a note under section 613 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-618 effective Oct. 1, 1978, and
applicable to taxable years ending on or after such date, see
section 403(c) of Pub. L. 95-618, set out as a note under section
613 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1901(a)(87)(A)(ii) of Pub. L. 94-455, as amended by Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
''The amendment made by clause (i) (amending this section) shall
apply with respect to elections to form aggregations of operating
mineral interests made under section 614(c)(1) of the Internal
Revenue Code of 1986 (formerly I.R.C. 1954) for taxable years
beginning after December 31, 1976.''
EFFECTIVE DATE OF 1964 AMENDMENT
Section 226(d) of Pub. L. 88-272 provided that: ''The amendments
made by subsections (a) and (b) (amending this section) shall apply
to taxable years beginning after December 31, 1963.''
EFFECTIVE DATE OF 1958 AMENDMENT
Section 37(e) of Pub. L. 85-866 provided that: ''The amendments
made by subsections (a) and (c) (amending this section) shall apply
with respect to taxable years beginning after December 31, 1953,
and ending after August 16, 1954. The amendments made by subsection
(b) (amending this section) shall apply with respect to taxable
years beginning after December 31, 1957, except that such
amendments shall, at the election of the taxpayer made in
conformity with such amendments, apply with respect to taxable
years beginning after December 31, 1953, and ending after August
16, 1954. The amendment made by subsection (d) (amending this
section) shall apply with respect to taxable years beginning after
December 31, 1957, except that with respect to any taxpayer such
amendment shall, at the election of the taxpayer, apply with
respect to taxable years beginning after December 31, 1953, and
ending after August 16, 1954.''
ALLOCATION OF BASIS IN CERTAIN CASES
Section 226(c) of Pub. L. 88-272, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''For
purposes of the Internal Revenue Code of 1986 (formerly I.R.C.
1954) -
''(1) Fair market value rule. - Except as provided in paragraph
(2), if a taxpayer has a section 614(b) aggregation, then the
adjusted basis (as of the first day of the first taxable year
beginning after December 31, 1963) of each property included in
such aggregation shall be determined by multiplying the adjusted
basis of the aggregation by a fraction -
''(A) the numerator of which is the fair market value of such
property, and
''(B) the denominator of which is the fair market value of
such aggregation.
For purposes of this paragraph, the adjusted basis and the fair
market value of the aggregation, and the fair market value of
each property included therein, shall be determined as of the day
preceding the first day of the first taxable year which begins
after December 31, 1963.
''(2) Allocation of adjustments, etc. - If the taxpayer makes
an election under this paragraph with respect to any section
614(b) aggregation, then the adjusted basis (as of the first day
of the first taxable year beginning December 31, 1963) of each
property included in such aggregation shall be the adjusted basis
of such property at the time it was first included in the
aggregation by the taxpayer, adjusted for that portion of those
adjustments to the basis of the aggregation which are reasonably
attributable to such property. If, under the preceding sentence,
the total of the adjusted bases of the interests included in the
aggregation exceeds the adjusted basis of the aggregation (as of
the day preceding the first day of the first taxable year which
begins after December 31, 1963), the adjusted bases of the
properties which include such interests shall be adjusted, under
regulations prescribed by the Secretary of the Treasury or his
delegate, so that the total of the adjusted bases of such
interests equals the adjusted basis of the aggregation. An
election under this paragraph shall be made at such time and in
such manner as the Secretary of the Treasury or his delegate
shall by regulations prescribe.
''(3) Definitions. - For purposes of this subsection -
''(A) Section 614(b) aggregation. - The term 'section 614(b)
aggregation' means any aggregation to which section
614(b)(1)(A) of the Internal Revenue Code of 1986 (as in effect
before the amendments made by subsection (a) of this section)
applied for the day preceding the first day of the first
taxable year beginning after December 31, 1963.
''(B) Property. - The term 'property' has the same meaning as
is applicable, under section 614 of the Internal Revenue Code
of 1986, to the taxpayer for the first taxable year beginning
after December 31, 1963.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 57, 291, 465, 468, 617,
636, 1016, 1254 of this title.
