Eligibility
Taxpayers with an economic interest in mines, oil and gas wells, other natural deposits, or timber are eligible for this deduction.
Frequently Asked Questions
Who is eligible for the Depletion Deduction for Natural Resources?
Taxpayers with an economic interest in mines, oil and gas wells, other natural deposits, or timber are eligible for this deduction.
How does the Depletion Deduction for Natural Resources work?
Allows a deduction from taxable income to account for the reduction of a natural resource's reserves as they are extracted and sold.
What law authorizes the Depletion Deduction for Natural Resources?
The Depletion Deduction for Natural Resources is authorized under IRC §611 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §611
Source: Internal Revenue Code, Title 26, United States Code
§ 611. Allowance of deduction for depletion(a) General ruleIn the case of mines, oil and gas wells, other natural deposits, and timber, there shall be allowed as a deduction in computing taxable income a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case; such reasonable allowance in all cases to be made under regulations prescribed by the Secretary. For purposes of this part, the term “mines” includes deposits of waste or residue, the extraction of ores or minerals from which is treated as mining under section 613(c). In any case in which it is ascertained as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate (but not the basis for depletion) shall be revised and the allowance under this section for subsequent taxable years shall be based on such revised estimate.
(b) Special rules(1) LeasesIn the case of a lease, the deduction under this section shall be equitably apportioned between the lessor and lessee.
(2) Life tenant and remaindermanIn the case of property held by one person for life with remainder to another person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant.
(3) Property held in trustIn the case of property held in trust, the deduction under this section shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.
(4) Property held by estateIn the case of an estate, the deduction under this section shall be apportioned between the estate and the heirs, legatees, and devisees on the basis of the income of the estate allocable to each.
(c) Cross referenceFor other rules applicable to depreciation of improvements, see section 167.
(Aug. 16, 1954, ch. 736, 68A Stat. 207; Pub. L. 85–866, title I, § 35, Sept. 2, 1958, 72 Stat. 1632; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)
Editorial Notes
Amendments1976—Subsec. (a). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
1958—Subsec. (d)(4). Pub. L. 85–866 substituted “devisees” for “devises”.
Statutory Notes and Related Subsidiaries
Effective Date of 1958 AmendmentAmendment by Pub. L. 85–866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85–866, set out as a note under section 165 of this title.