Depletion of Minerals
BY FRED A. GOULETTE PRINCIPAL, LOS ANGELES OFFICE
Presented before the Sixth Annual Tax Accounting Conference of the California Society of Certified Public Accountants — October, 1955
Like the gold rush of '49, the uranium boom of the 1950's has caused people all over the country, if not the world, to suddenly become
aware of the mining industry. All kinds of people, from men with just enough capital to buy geiger counters to wealthy investors and large corporations, have developed a burning interest in prospecting for uranium.
Furthermore, the dissemination of information with respect to the various tax advantages available, in some circumstances, to the investor
in a mine has caused many individuals with high incomes to become interested in mining.
Because of this great interest in mining that is currently being generated, the accountant, more than ever before, is apt to encounter tax questions relating to mining operations. Consequently, he should be prepared to give some of the answers to these questions as well as to discuss the tax aspects generally.
Since depletion is one of the most important tax factors in the mining industry, this paper should be both timely and useful, especially for those accountants who may not have had an opportunity to gain experience
with respect to depletion problems.
Depletion has been constantly changing and expanding since 1913, and the following chronology of events will give you a bird's-eye view of its growth.
Cost depletion first appeared in the Revenue Act of 1913 which provided that it should be limited to 5% of the gross value of the output at the mouth of the mine. This was changed by the 1916 Act which eliminated the limitation and permitted a reasonable allowance for depletion.
Discovery depletion was first introduced in the 1918 Act.
The income limitation came into being in the 1921 Act, which provided that discovery depletion should be limited to net income from the property, but not less than cost depletion. The 1924 Act changed this to 50% of net income from the property.