1941 BTA LEXIS 1492 | B.T.A. | 1941
Lead Opinion
1. On its income tax returns for 1935, 1936, and 1937 petitioner claimed as deductible mining expense $27,027.11, $31,971.93, and $34,936.20, respectively, representing an apportionment of its expenditures for mill, tunnels, and operating devices based on the amount of ore extracted in each year. The Commissioner disallowed these deductions on the ground that the expenditures “should be capitalized and recovered through deduction for depletion.”
The petitioner treats the tunnels, mill, and equipment as if they were facilities acquired during normal production for the purpose of maintaining operations at normal production and did not increase the efficiency of operation or add to the value of the property. Upon that
The disallowance of the deduction as deferred expense of any part of such expenditures in the taxable years is sustained.
2. In computing the deduction for percentage depletion based on the net income from the property, the Commissioner treated the interest paid by petitioner on its borrowings as an expense of mining operations, thereby reducing the basic net income. Petitioner contests this reduction. The contention was considered in Mirabel Quicksilver Co., 41 B. T. A. 401, and St. Marys Oil & Gas Co., 42 B. T. A. 270, and the taxpayer’s position was rejected. The Commissioner’s determination is sustained.
3. Petitioner claims a credit because it was forbidden by the California Code to pay a dividend. The contention is contrary to Helvering v. Northwest Steel Rolling Mills, Inc., 311 U. S. 46; Crane-Johnson Co. v. Helvering, 311 U. S. 54, and Belle-Vue Manufacturing Co., 43 B. T. A. 12, and the Commissioner’s determination is sustained.
Other matters have been settled by the parties and will be reflected in the computation of the redetermined deficiency.
Decision will be entered under Rule 50.