consent. The consent of each shareholder shall be in the form of a statement signed by the shareholder in which he states that he consents to the election by the corporation under this paragraph. Each of such statements shall set forth the name and address of the corporation and of the shareholder; the number of shares of stock of the corporation owned by such shareholder at any time during any taxable year of the corporation beginning after December 31, 1962; the date (or dates) on which such stock was acquired, and, if disposed of, the date (or dates) of disposition; and the internal revenue officer with whom the shareholder's income tax returns have been filed for each of such taxable years in which he owned any such stock. In addition, a consent under this paragraph is not effective unless (1) the statutory period for assessment of any deficiency for each taxable year for which there would be a deficiency attributable to the election and consents under this paragraph has not expired on the date the election and consents under this paragraph are filed, and (ii) there is included in, or attached to, the statement of consent a written consent that the statutory period for assessment of any deficiency for any taxable year (to the extent that such deficiency is attributable to the election and consents under this paragraph) shall not expire before the expiration of 1 year after the date the election and consents under this paragraph are filed. Each of the statements of consent under this subparagraph shall be filled with the corporation's election under this paragraph. The consents of all shareholders may be incorporated in one statement.

(4) Election and consents are binding. The election and consents under this paragraph are binding and may not be withdrawn.

(c) New shareholders. Section 1372 (e) (1) of the Code provides that an election by a corporation under section 1372 (a) of the Code shall terminate if certain new shareholders do not consent to such election within the time prescribed by regulations. New shareholders of a corporation which makes an election under paragraph (b) of this section may not have consented to the corporation's election under section 1372(a) of the Code within such prescribed time as a result

of a termination of such election under section 1372(e) (5) of the Code prior to the enactment of Public Law 89-389. Therefore, notwithstanding the provisions of section 1372(e) (1) of the Code, and the regulations thereunder, an election by a corporation under section 1372 (a) of the Code shall not be treated as terminated for the failure of any new shareholder to file a timely consent under section 1372 (e) (1) of the Code, for any of the taxable years of the corporation between and including the earliest taxable year determined under subparagraph (1) of this paragraph, and the taxable year during which the corporation files an election under paragraph (b) of this section, if

(1) The corporation's election under section 1372(a) of the Code would have terminated for a taxable year under section 1372(e) (5) of the Code in the event it had not made an election under paragraph (b) of this section, and

(2) A proper consent under section 1372(e) (1) of the Code is filed by such new shareholder with the corporation's election under paragraph (b) of this section.

(Sec. 7805, 68A Stat. 917; 26 U.S.C. 7805) [T.D. 6912, 32 F.R. 3343, Feb. 28, 1967]

15.1-3 Elections as to method of recapture. 15.1-4 Special rules.

AUTHORITY: The provisions of this Part 15 issued under sec. 7805, 68A Stat. 917; 26 U.S.C. 7805.

SOURCE: The provisions of this Part 15 contained in T.D. 6907, 31 FR 16776, Dec. 31, 1966, unless otherwise noted. § 15.1

Statutory provisions; allowance of deductions; recapture; elections. (a) Section 615 (e) and (f) of the Internal Revenue Code of 1954, added by section 2(a) of the Act of September 12, 1966:

SEC. 615. Exploration expenditures.

(e) Election to have section apply. This section (other than subsections (f) and (g)) shall apply only if the taxpayer so elects in such manner as the Secretary or his delegate may by regulations prescribe. Such election shall be made before the expiration of 3 years after the time prescribed by law (determined without any extension thereof) for filling the return for the first taxable year ending after the date of the enactment of this subsection in which expenditures described in subsection a) are paid or incurred after such date. Such election may not be revoked after the expiration of such 3 years.

(1) Section 615 and section 617 elections to be mutually exclusive. A taxpayer who has made an election under subsection (e) (which he has not revoked) may not make an election under section 617(a). A taxpayer who has made an election under section 617(a) (which he has not revoked) may not make an election under subsection (e) of this section.

[Sec. 615 (e) and (f) of the Internal Revenue Code of 1954, added by sec. 2(a) of the Act of Sept. 12, 1966 (Public Law 89-570, 80 Stat. 763)]

(b) Section 617 (a) and (b) of the Internal Revenue Code of 1954, added by section 1(a) of the Act of September 12, 1966:

SEC. 617. Additional exploration expenditures in the case of domestic mining—(a) Allowance of deduction—(1) General rule. at the election of the taxpayer, expenditures paid or incurred during the taxable year for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral in the United States or on the Outer Continental Shelf (within the meaning of sec. 2 of the Outer Continental Shelf Lands Act, as amended and supplemented; 43 U.S.C. 1331), and paid or incurred before the beginning of the development stage of the mine, shall be allowed as a deduction in computing taxable income. This subsection shall apply only with respect to the amount of such expenditures which, out for this subsection, would not be allowable as a deduction for the taxable year. This subsection shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation provided in section 167, but allowances for depreciation shall be considered, for purposes of this subsection, as expenditures paid or incurred. In no case shall this subsection apply with respect to amounts paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of oll

or gas or of any mineral with respect to which a deduction for percentage depletion is not allowable under section 613.

(2) Elections-(A) Method. Any election under this subsection shall be made in such manner as the Secretary or his delegate may by regulations prescribe.

(B) Time and scope. The election provided by paragraph (1) for the taxable year may be made at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for the taxable year. Such an election for the taxable year shall apply to all expenditures described in paragraph (1) paid or incurred by the taxpayer during the taxable year or during any subsequent taxable year. Such an election may not be revoked after the last day of the third month following the month in which the final regulations issued under the authority of this subsection are published in the FEDERAL REGISTER, unless the Secretary or his delegate consents to such revocation.

(C) Deficiencies. The statutory period for the assessment of any deficiency for any taxable year, to the extent such deficiency is attributable to an election or revocation of an election under this subsection, shall not expire before the last day of the 2-year period beginning on the day after the date on which such election or revocation of election is made; and such deficiency may be assessed at any time before the expiration of such 2year period, notwithstanding any law or rule of law which would otherwise prevent such assessment.

(b) Recapture on reaching producing stage (1) Recapture. If, in any taxable year, any mine with respect to which expenditures were deducted pursuant to subsection (a) reaches the producing stage, then

(A) If the taxpayer so elects with respect to all such mines reaching the producing stage during the taxable year, he shall include in gross income for the taxable year an amount equal to the adjusted exploration expenditures with respect to such mines, and the amount so included in income shall be treated for purposes of this subtitle as expenditures which (1) are paid or incurred on the respective dates on which the mines reach the producing stage, and (11) are properly chargeable to capital account.

(B) If subparagraph (A) does not apply with respect to any such mine, then the deduction for depletion under section 611 with respect to the property shall be disallowed until the amount of depletion which would be allowable but for this subparagraph equals the amount of the adjusted exploration expenditures with respect to such mine.

(2) Elections-(A) Method. Any election under this subsection shall be made in such manner as the Secretary or his delegate may by regulations prescribe.

(B) Time and scope. The election provided by paragraph (1) for any taxable year may be made or changed not later than the time prescribed by law for filling the return (including extensions thereof) for such taxable year.

[Sec. 617 (a) and (b) of the Internal Revenue Code of 1954, added by sec. 1(a) of the Act of Sept. 12, 1966 (Public Law 89-570, 80 Stat. 759) ]

(c) Section 703(b) of the Internal Revenue Code of 1954, as amended by section 2(b) of the Act of September 12, 1966:

SEC. 703. Partnership computations. *

(b) Elections of the partnership. Any election affecting the computation of taxable income derived from a partnership shall be made by the partnership, except that the election under section 901, relating to taxes of foreign countries and possessions of the United States, and any election under section 615 (relating to exploration expenditures) or under section 617 (relating to additional exploration expenditures in the case of domestic mining), shall be made by each partner separately.

[Sec. 703(b) of the Internal Revenue Code of 1954, as amended by sec. 2(b) of the Act of Sept. 12, 1966 Public Law 89-570, 80 Stat. 764)]

(d) Section 3 of the Act of September 12, 1966:

SEC. 3. The amendments made by this Act shall apply to taxable years ending after the date of the enactment of this Act but only in respect of expenditures paid or incurred after such date.

[Sec. 3 of the Act of Sept. 12, 1966 (Public Law 89-570, 80 Stat. 764)]

§ 15.0-1 Scope of regulations in this part.

The regulations in this part relate to expenditures of the type described in section 615(a) or in section 617(a) (1) paid or incurred after September 12, 1966. The regulations in this part do not apply to the income tax treatment of mining exploration expenditures paid or incurred before September 13, 1966, and no election made pursuant to the provisions of the regulations in this part shall have any effect on the income tax treatment of exploration expenditures paid or incurred before such date. See § 15.1-4 for rules relating to treatment of exploration expenditures paid or in

curred during taxable years beginning before September 13, 1966, and ending after September 12, 1966.

§ 15.1-1 Elections to deduct.

(a) Manner of making election (1) Election to deduct under section 617(a). The election to deduct exploration expenditures as expenses under section 617 (a) may be made by deducting such expenditures in the taxpayer's income tax return for the first taxable year ending after September 12, 1966, for which the taxpayer desires to deduct exploration expenditures which are paid or incurred by him during such taxable year and after September 12, 1966. This election may be exercised by deducting such expenditures either in the taxpayer's return for such taxable year or in an amended return filed before the expiration of the period for filing a claim for credit or refund of income tax for such taxable year. Where the election is made in an amended return for a taxable year prior to the most recent year for which the taxpayer has filed a return, the taxpayer shall file amended income tax returns, reflecting any increase or decrease in tax attributable to the election, for all taxable years affected by the election. See section 617(a) (2) (C) for provisions relating to the tolling of the statute of limitations for the assessment of any deficiency for any taxable year, to the extent the deficiency is attributable to an election under section 617(a). In applying the election to the years affected there shall be taken into account the effect that any adjustments resulting from the election shall have on other items affected thereby, such as the deduction for charitable contributions, the foreign tax credit, net operating loss and other deductions or credits the amount of which is limited by the taxpayer's taxable income, and the effect that adjustments of any such items have on other taxable years. Amended returns filed for taxable years subsequent to the taxable year for which the election under section 617(a) is made by amended return shall apply the recapture provisions of subsections (b) (1) (B), (c), and (d) of section 617.

(2) Election to deduct under section 615-(1) General rule. The election to deduct exploration expenditures under section 615 shall be made in a statement

filed with the district director, or director of the regional service center, with whom the taxpayer's income tax return is required to be filed. If the election is made within the time period prescribed for filing an income tax return (including extensions thereof) for the first taxable year ending after September 12, 1966, during which the taxpayer pays or incurs expenditures which are within the scope of section 615 and which are paid or incurred by him after September 12, 1966, this statement shall be attached to the taxpayer's income tax return for such taxable year. If the election is made after the time prescribed for filing such return but before the expiration of the period (described in paragraph (d) (1) of this section) for making the election under section 615(e), the statement must be signed by the taxpayer or his authorized representative. The statement shall be filed even though the taxpayer charges to capital account all such expenditures paid or incurred by him during such taxable year after such date. The statement shall clearly indicate that the taxpayer elects to have section 615 apply to all amounts deducted by him with respect to mining exploration expenditures paid or incurred after September 12, 1966. If the taxpayer desires, he may file this statement by attaching it to his return for a taxable year prior to the first taxable year ending after September 12, 1966, in which he pays or incurs mining exploration expenditures. Except as provided in subdivision (ii) of this subparagraph, if the taxpayer does not file such a statement within the period prescribed by section 615(e) and paragraph (d) (1) of this section, any amounts deducted by him with respect to exploration expenditures paid or incurred by him after September 12, 1966, will be deemed to have been deducted pursuant to an election under section 617(a).

(11) Exception. The last sentence of subdivision (1) of this subparagraph shall not apply if all mining exploration expenditures which are paid or incurred by the taxpayer after September 12, 1966, and which are deducted by him in his income tax return for the first taxable year ending after September 12, 1966, during which he pays or incurs such expenditures are outside the scope of section 617 (a). For example, assume that, in his

return for his first taxable year ending after September 12, 1966, a taxpayer deducts mining exploration expenditures paid or incurred after September 12, 1966, and does not attach to his return the statement described in subdivision (1) of this subparagraph. However, all of the exploration expenditures paid or incurred by the taxpayer after September 12, 1966, and before the end of the taxable year were paid or incurred with respect to minerals located neither in the United States nor on the Outer Continental Shelf. The taxpayer will be deemed to have made an election under section 615(e) by deducting all or part of those expenditures as expenses in his income tax return.

A

(b) Information to be furnished. taxpayer who makes or has made an election under either section 615(e) or section 617(a) to deduct expenditures paid or incurred after September 12, 1966, shall indicate clearly on his income tax return for each taxable year for which he deducts any such expenditures the amount of the deduction claimed under section 615 (a) or (b) or section 617(a) with respect to each property or area of interest. Such property or area of interest shall be identified by a description sufficiently adequate to permit application of the recapture rules of section 617 (b), (c), and (d) and the rules of section 615(g) (relating to effect of transfer of mineral property).

(c) Effect of election. A taxpayer who has made an election under section 615 (e) may never make an election under section 617(a) unless, within the period set forth in section 615(e) and paragraph (b) (1) of § 15.1-2, he revokes his election under section 615(e). A taxpayer who has made an election under section 617 (a) may never make an election under section 615(e) unless, within the period set forth in section 615 (e) and paragraph (b) (1) of § 15.1-2, he revokes his election under section 617(a). A taxpayer who has made, and has not revoked, an election under section 617(a) may not, in his return for the taxable year for which the election is made or for any subsequent taxable year, charge to capital account any expenditures which are within the scope of section 617(a), and he must deduct all such expenditures as expenses. Except as provided in paragraph (a) (2) of 1.615-2 of this chapter (Income Tax

Regulations), a taxpayer who makes an election under 615(e) may not change his treatment of exploration expenditures deducted, deferred, or capitalized pursuant to such election unless he revokes the election made under section 615(e).

(d) Time for making election—(1) Election under section 615(e). A taxpayer may not make an election under section 615(e) after the expiration of the 3-year period beginning with the date prescribed by section 6072 or other provision of law for filing the taxpayer's income tax return for the first taxable year ending after September 12, 1966, in which the taxpayer pays or incurs expenditures to which section 615(a) would apply if an election were made under section 615(e). This 3-year period shall be determined without regard to any extension of time for filing the taxpayer's income tax return. An election under section 615(e) may not be made after the expiration of the 3-year period even though the taxpayer charged to capital account, or erroneously deducted as development expenditures under section 616, all mine exploration expenditures paid or incurred by him after September 12, 1966, and before the end of his first taxable year ending after September 12, 1966, in which he paid or incurred such expenditures.

(2) Election under section 617(a). The election under section 617(a) may be made at any time before the expiration of the period prescribed for filing a claim for credit or refund of the tax imposed by chapter 1 for the first taxable year for which the taxpayer desires to deduct exploration expenditures under section 617.

(3) Timely mailing treated as timely filing. Section 7502 (relating to timely mailing treated as timely filing) shall apply in determining the date when an election under either section 615(e) or section 617(a) is made.

resentative, which sets forth that the taxpayer is revoking the election previously made by him with respect to the deduction of mining exploration expenditures paid or incurred after September 12, 1966, and states with whom the document making the election was filed. A taxpayer revoking such an election shall file amended income tax returns, reflecting any increase or decrease in tax attributable to the revocation of election, for all taxable years affected by the revocation of election. See section 617(a) (2) (C) for provisions relating to the tolling of the statute of limitations for the assessment of any deficiency for any taxable year, to the extent the deficiency is attributable to an election or revocation of election under section 617(a). In applying the revocation of an election to the years affected there shall be taken into account the effect that any adjustments resulting from the revocation of election shall have on other items affected thereby, such as the deduction for charitable contributions, the foreign tax credit, net operating loss, and other deductions or credits the amount of which is limited by the taxpayer's taxable income, and the effect that adjustments of any such items have on other taxable years.

(b) Time for revoking election (1) Election under section 615(e). An election under section 615(e) may be revoked at any time before the expiration of the 3-year period described in paragraph (d) (1) of 15.1-1. Such an election may not be revoked after the expiration of the 3-year period.

(2) Election under section 617(a). An election under section 617(a) may be revoked before the expiration of the last day of the third month following the month in which the final regulations issued under the authority of section 617 are published in the FEDERAL REGISTER. After the expiration of this period, a taxpayer who has made an election under section 617(a) may not revoke that election unless he obtains the consent of the Secretary or his delegate in the manner to be set forth in the final regulations under section 617.

(c) Additional information to be furnished by a transferor of mineral property. If, before revoking his election, the taxpayer has transferred any mineral property with respect to which he de

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