Taxable Years Taxable Years Taxable Years missioner with the approval of the missioner with the approval of the Commissioner with the approval Secretary) in effect at the time Secretary) in effect at the time of the Secretary) in effect at the of the filing of the consent by of the filing of the consent by time of the filing of the consent by the taxpayer referred to in section the taxpayer referred to in section the taxpayer referred to in section 22 (b) (9). The reduction shall be 22 (b) (9). The reduction shall be 22 (b) (9). The reduction shall be made as of the first day of the tax-made as of the first day of the tax- made as of the first day of the taxable year in which the discharge able year in which the discharge able year in which the discharge occurred except in the case of occurred except in the case of occurred except in the property not held by the taxpayer on such first day, in which case it shall take effect as of the time the holding of the taxpayer began. Sec. 113 (b) (3), I. R. C., supra, added to I. R. C. by Sec. 215 (b), R. A. of 1939. Sec. 215 (c) of said Act makes amendment applicable to taxbeginning years able Dec. 31, 1938. after property not held by the taxpayer Sec. 113 (b) (3), I. R. C., supra, Sec. 113. (c) Property on which Sec. 113. (c) Property on which lessee has made improvements.- lessee has made improvements.— Neither the basis nor the adjusted Neither the basis nor the adjusted basis of any portion of real prop-basis of any portion of real property shall, in the case of the lessor erty shall, in the case of the lessor of such property, be increased or of such property, be increased or diminished on account of income diminished on account of income dederived by the lessor in respect of rived by the lessor in respect of such property and excludible from such property and excludible from gross income under section 22 (b) gross income under section 22 (b) (11). If an amount representing (11). If an amount representing any part of the value of real prop-any part of the value of real property attributable to buildings erty attributable to buildings erected or other improvements erected or other improvements made made by a lessee in respect of such by a lessee in respect of such propproperty was included in gross in-erty was included in gross income come of the lessor for any taxable of the lessor for any taxable year year beginning before January 1, beginning before January 1, 1942, 1942, the basis of each portion of the basis of each portion of such such property shall be properly ad- property shall be properly adjusted justed for the amount so included for the amount so included in gross in gross income. Sec. 113 (c), I. R. C., supra, added to I. R. C. by Sec. 115 (b), R. A. of 1942. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 114. Basis for depreciation and depletion. income. Sec. 113 (c), I. R. C., supra, added to I. R. C. by Sec. 115 (b), R. A. of 1942. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 114. Basis for depreciation and depletion. Sec. 114. (a) Basis for depre- Sec. 114. (a) Basis for depreciation. The basis upon which ex- ciation.-The basis upon which exhaustion, wear and tear, and haustion, wear and tear, and case of property not held by the taxpayer on such first day, in which case it shall take effect as of the time the holding of the taxpayer began. Sec. 113 (b) (3), I. R. C., supra, added to I. R. C. by Sec. 215 (b), R. A. of 1939. Sec. 215 (c) of said Act makes amendment applicable to taxafter years beginning Dec. 31, 1938. able Sec. 114. Basis for depreciation and depletion. Sec. 114. (a) Basis for depreciation.-The basis upon which exhaustion, wear and tear, and obsolescence are to be allowed in obsolescence are to be allowed in obsolescence are to be allowed in respect of any property shall be respect of any property shall be respect of any property shall be the adjusted basis provided in sec- the adjusted basis provided in section 113 (b) for the purpose of determining the gain upon the sale or other disposition of such property. Sec. 114. (b) Basis for depletion. tion 113 (b) for the purpose of Sec. 114. (b) Basis for depletion. the adjusted basis provided in seetion 113 (b) for the purpose of determining the gain upon the sale or other disposition of such property. Sec. 114. (b) Basis for deple tion. Commissioner with the approval of the Secretary) in effect at the time of the filing of the consent by the taxpayer referred to in section 22 (b) (9). The reduction shall be made as of the first day of the taxable year in which the discharge occurred except in the case of property not held by the taxpayer on such first day, in which case it shall take effect as of the time the holding of the taxpayer began. Sec. 113 (b) (3), I. R. C., supra, added to I. R. C. by Sec. 215 (b), R. A. of 1939. Sec. 215 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. Taxable Years with the approval of the Secretary) Sec. 113 (b), I. R. C., supra, Taxable Years Beginning before 1939 Sec. 114. Basis for depreciation and depletion. Sec. 114. Basis for depreciation and depletion. Sec. 114. Basis for depreciation and depletion. Sec. 114. (a) Basis for depre- Sec. 114. (a) Basis for depreciation. The basis upon which ex- ciation. The basis upon which exhaustion, wear and tear, and haustion, wear and tear, and obsolescence are to be allowed in obsolescence are to be allowed in respect of any property shall be respect of any property shall be the the adjusted basis provided in sec-adjusted basis provided in section tion 113 (b) for the purpose of 113 (b) for the purpose of deterdetermining the gain upon the sale mining the gain upon the sale or or other disposition of such prop- other disposition of such property. erty. Sec. 114. (b) Basis for depletion. Sec. 114. (a) Basis for depreciation. See p. 174, Eighth Edition. Sec. 114. (b) Basis for depletion. Sec. 114. (b) Basis for depletion. Taxable Years Taxable Years Taxable Years Sec. 114. (b) (1) General rule. Sec. 114. (b) (1) General rule. Sec. 114. (b) (1) General rule. -The basis upon which depletion-The basis upon which depletion -The basis upon which depletion is to be allowed in respect of any is to be allowed in respect of any is to be allowed in respect of any property shall be the adjusted property shall be the adjusted property shall be the adjusted basis provided in section 113 (b) basis provided in section 113 (b) basis provided in section 113 (b) for the purpose of determining the for the purpose of determining the for the purpose of determining the gain upon the sale or other dis- gain upon the sale or other dis- gain upon the sale or other disposition of such property, except position of such property, except position of such property, except as provided in paragraphs (2), as provided in paragraphs (2), as provided in paragraphs (2), (3), and (4) of this subsection. (3), and (4) of this subsection. (3), and (4) of this subsection. Sec. 114. (b) (2) Discovery Sec. 114. (b) (2) Discovery Sec. 114. (b) (2) Discovery value in case of mines.-In the value in case of mines.-In the value in case of mines.-In the case of mines (other than metal, case of mines (other than metal, case of mines (other than metal, coal, fluorspar, ball and sagger coal, fluorspar, ball and sagger clay, coal, or sulphur mines) discovered clay, rock asphalt, or sulphur rock asphalt, or sulphur mines) dis- by the taxpayer after February 28, mines) discovered by the taxpayer covered by the taxpayer after Feb-1913, the basis for depletion shall after February 28, 1913, the basis ruary 28, 1913, the basis for be the fair market value of the for depletion shall be the fair mar-depletion shall be the fair market property at the date of discovery ket value of the property at the value of the property at the date of or within thirty days thereafter, date of discovery or within thirty discovery or within thirty days if such mines were not acquired as days thereafter, if such mines were thereafter, if such mines were not the result of purchase of a proven not acquired as the result of pur-acquired as the result of purchase tract or lease, and if the fair marchase of a proven tract or lease, of a proven tract or lease, and if ket value of the property is maand if the fair market value of the fair market value of the prop- terially disproportionate to the the property is materially dispro- erty is materially disproportionate cost. The depletion allowance portionate to the cost. The deple- to the cost. The depletion allowance under section 23 (m) based on distion allowance under section 23 under section 23 (m) based on dis- covery value provided in this para(m) based on discovery value pro-covery value provided in this para- graph shall not exceed 50 per vided in this paragraph shall not graph shall not exceed 50 per centum of the net income of the exceed 50 per centum of the net centum of the net income of the taxpayer (computed without alincome of the taxpayer (computed taxpayer (computed without al- lowance for depletion) from the without allowance for depletion) lowance for depletion) from the property upon which the discovery from the property upon which the property upon which the discovery was made, except that in no case discovery was made, except that was made, except that in no case shall the depletion allowance under in no case shall the depletion al- shall the depletion allowance under section 23 (m) be less than it would lowance under section 23 (m) be section 23 (m) be less than it would be if computed without reference Discoveries less than it would be if computed be if computed without reference to discovery value. Discoveries shall include minerals in commervalue. Discoveries shall include shall include minerals in commercial quantities contained within a minerals in commercial quantities cial quantities contained within a vein or deposit discovered in an contained within a vein or deposit vein or deposit discovered in an existing mine or mining tract by discovered in an existing mine or existing mine or mining tract by the taxpayer after February 28, mining tract by the taxpayer after the taxpayer after February 28, 1913, if the vein or deposit thus February 28, 1913, if the vein or 1913, if the vein or deposit thus discovered was not merely the undeposit thus discovered was not discovered was not merely the un-interrupted extension of a continmerely the uninterrupted extension interrupted extension of a continuing commercial vein or deposit of a continuing commercial vein or uing commercial vein or deposit already known to exist, and if the deposit already known to exist, and already known to exist, and if the discovered minerals are of suffiif the discovered minerals are of discovered minerals are of sufficient value and quantity that they sufficient value and quantity that cient value and quantity that they could be separately mined they could be separately mined and could be separately mined and marketed at a profit. marketed at a profit. marketed at a profit. without reference to discovery to discovery value. Sec. 114. (b) (3) Percentage Sec. 114 (b) (2), I. R. C., and Sec. 114. (b) (3) Percentage Sec. 114. (b) (3) Percentage depletion for oil and gas wells.- depletion for oil and gas wells.-depletion for oil and gas wells.— In the case of oil and gas wells the In the case of oil and gas wells the In the case of oil and gas wells the Sec. 114. (b) (1) General rule. Sec. 114. (b) (1) General rule.— -The basis upon which depletion The basis upon which depletion is is to be allowed in respect of any to be allowed in respect of any property shall be the adjusted property shall be the adjusted basis provided in section 113 (b) basis provided in section 113 (b) for the purpose of determining the for the purpose of determining the gain upon the sale or other dis- gain upon the sale or other disposition of such property, except position of such property, except as provided in paragraphs (2), as provided in paragraphs (2), (3), and (4) of this subsection. (3), and (4) of this subsection. Sec. 114. (b) (2) Discovery Sec. 114. (b) (2) Discovery value in case of mines.-In the value in case of mines. In the case of mines (other than metal, case of mines (other than metal, coal, or sulphur mines) discovered coal, or sulphur mines) discovered by the taxpayer after February 28, by the taxpayer after February 28, 1913, the basis for depletion shall 1913, the basis for depletion shall be the fair market value of the be the fair market value of the property at the date of discovery property at the date of discovery or within thirty days thereafter, or within thirty days thereafter, if such mines were not acquired as if such mines were not acquired as the result of purchase of a proven the result of purchase of a proven tract or lease, and if the fair mar- tract or lease, and if the fair market value of the property is ma-ket value of the property is materially disproportionate to the terially disproportionate to the cost. The depletion allowance cost. The depletion allowance under section 23 (m) based on dis- under section 23 (m) based on discovery value provided in this para-covery value provided in this paragraph shall not exceed 50 per graph shall not exceed 50 per centum of the net income of the centum of the net income of the taxpayer (computed without al- taxpayer (computed without allowance for depletion) from the lowance for depletion) from the property upon which the discovery property upon which the discovery was made, except that in no case was made, except that in no case shall the depletion allowance under shall the depletion allowance under section 23 (m) be less than it would section 23 (m) be less than it would be if computed without reference be if computed without reference to to discovery value. Discoveries discovery value. Discoveries shall shall include minerals in commer- include minerals in commercial cial quantities contained within a quantities contained within a vein vein or deposit discovered in an or deposit discovered in an existing existing mine or mining tract by mine or mining tract by the taxthe taxpayer after February 28, payer after February 28, 1913, if 1913, if the vein or deposit thus the vein or deposit thus discovered discovered was not merely the un- was not merely the uninterrupted interrupted extension of a contin- extension of a continuing commeruing commercial vein or deposit cial vein or deposit already known already known to exist, and if the to exist, and if the discovered mindiscovered minerals are of suffi-erals are of sufficient value and cient value and quantity that they quantity that they could be sepcould be separately mined and arately mined and marketed at a marketed at a profit. profit. Taxable Years Sec. 114. (b) (1) General rule. Sec. 114. (b) (2) Discovery value in case of mines. See p. 176, Eighth Edition. Sec. 114. (b) (3) Percentage Sec. 114. (b) (3) Percentage depletion for oil and gas wells.- depletion for oil and gas wells.In the case of oil and gas wells the In the case of oil and gas wells the Sec. 114. (b) (3) Percentage depletion for oil and gas wells. See p. 176, Eighth Edition. Taxable Years Taxable Years Taxable Years allowance for depletion under sec- allowance for depletion under sec- allowance for depletion under section 23 (m) shall be 272 per cen- tion 23 (m) shall be 272 per cen- tion 23 (m) shall be 272 per centum of the gross income from the tum of the gross income from the tum of the gross income from the property during the taxable year, property during the taxable year, property during the taxable year, excluding from such gross income excluding from such gross income excluding from such gross income an amount equal to any rents or an amount equal to any rents or an amount equal to any rents or royalties paid or incurred by the royalties paid or incurred by the royalties paid or incurred by the taxpayer in respect of the prop- taxpayer in respect of the prop- taxpayer in respect of the property. Such allowance shall not ex- erty. Such allowance shall not ex- erty. Such allowance shall not exceed 50 per centum of the net in- ceed 50 per centum of the net in-ceed 50 per centum of the net income of the taxpayer (computed come of the taxpayer (computed come of the taxpayer (computed without allowance for depletion) without allowance for depletion) without allowance for depletion) from the property, except that in from the property, except that in from the property, except that in no case shall the depletion allow-no case shall the depletion allow- no case shall the depletion allowance under section 23 (m) be less ance under section 23 (m) be less ance under section 23 (m) be less than it would be if computed with- than it would be if computed with- than it would be if computed without reference to this paragraph. out reference to this paragraph. out reference to this paragraph. Sec. 114. (b) (4) Percentage de- Sec. 114. (b) (4) Percentage depletion for coal, fluorspar, ball and pletion for coal, fluorspar, ball and sagger clay, rock asphalt and metal sagger clay, rock asphalt and metal mines and sulphur.-The allowance mines and sulphur.-The allowance for depletion under section 23 (m) for depletion under section 23 (m) shall be, in the case of coal mines, shall be, in the case of coal mines, 5 per centum, in the case of metal 5 per centum, in the case of metal mines, fluorspar, ball and sagger mines, fluorspar, ball and sagger clay or rock asphalt mines, 15 per clay or rock asphalt mines, 15 per centum, and, in the case of sulphur centum, and, in the case of sulphur mines or deposits, 23 per centum, mines or deposits, 23 per centum, of the gross income from the prop- of the gross income from the property during the taxable year, ex-erty during the taxable year, excluding from such gross income an cluding from such gross income an amount equal to any rents or amount equal to any rents or royalties paid or incurred by the royalties paid or incurred by the taxpayer in respect of the property taxpayer in respect of the property. Such allowance shall not exceed 50 Such allowance shall not exceed 50 per centum of the net income of the per centum of the net income of the taxpayer (computed without allow- taxpayer (computed without allow ance for depletion) from the prop-ance for depletion) from the property, except in no case shall the erty, except in no case shall the depletion allowance under section depletion allowance under section 23 (m) be less than it would be if computed without reference to this paragraph. Sec. 114 (b) (4), I. R. C., 145 supra, amended by Sec. (a), R. A. of 1942, to read as above. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. For Sec. 114 (b) (4), I. R. C., before amendment, see 1942 column. 23 (m) be less than it would be if Sec. 114. (b) (4) Percentage depletion for coal and metal mines and sulphur.-The allowance for shall be, in the case of coal mines, depletion under section 23 (m) 5 per centum, in the case of metal mines, 15 per centum, and, in the 23 per centum, of the gross income case of sulphur mines or deposits, from the property during the taxable year, excluding from such any rents or royalties paid or ingross income an amount equal to curred by the taxpayer in respect of the property. Such allowance the net income of the taxpayer shall not exceed 50 per centum of (computed without allowance for depletion) from the property. A under this chapter in respect of a taxpayer making his first return property shall state whether he ance for such property for the taxelects to have the depletion allowable year for which the return is made computed with or without regard to percentage depletion, and the depletion allowance in respect of such property for such year shall be computed according to the election thus made. If the taxpayer fails to make such statement in the return, the depletion allowance for such property for such year shall be computed without reference to percentage depletion. The method, determined as above, of computing the depletion allowance shall be applied in the case of the property for all taxable years in which it is in the hands of such taxpayer, or of any other person if the basis of the property (for determining gain) in his hands is, under section 113, determined by reference to the basis in the hands of such taxpayer, |