Election to Aggregate Mineral Interests

§ 614. Definition of property(a) General ruleFor the purpose of computing the depletion allowance in the case of mines, wells, and other natural deposits, the term “property” means each separate interest owned by the taxpayer in each mineral deposit in each separate tract or parcel of land. (b) Special rules as to operating mineral interests in oil and gas wells or geothermal depositsIn the case of oil and gas wells or geothermal deposits—(1) In generalExcept as otherwise provided in this subsection—(A) all of the taxpayer’s operating mineral interests in a separate tract or parcel of land shall be combined and treated as one property, and (B) the taxpayer may not combine an operating mineral interest in one tract or parcel of land with an operating mineral interest in another tract or parcel of land. (2) Election to treat operating mineral interests as separate propertiesIf the taxpayer has more than one operating mineral interest in a single tract or parcel of land, he may elect to treat one or more of such operating mineral interests as separate properties. The taxpayer may not have more than one combination of operating mineral interests in a single tract or parcel of land. If the taxpayer makes the election provided in this paragraph with respect to any interest in a tract or parcel of land, each operating mineral interest which is discovered or acquired by the taxpayer in such tract or parcel of land after the taxable year for which the election is made shall be treated—(A) if there is no combination of interests in such tract or parcel, as a separate property unless the taxpayer elects to combine it with another interest, or (B) if there is a combination of interests in such tract or parcel, as part of such combination unless the taxpayer elects to treat it as a separate property. (3) Certain unitization or pooling arrangements(A) In generalUnder regulations prescribed by the Secretary, if one or more of the taxpayer’s operating mineral interests participate, under a voluntary or compulsory unitization or pooling agreement, in a single cooperative or unit plan of operation, then for the period of such participation—(i) they shall be treated for all purposes of this subtitle as one property, and (ii) the application of paragraphs (1), (2), and (4) in respect of such interests shall be suspended. (B) LimitationSubparagraph (A) shall apply to a voluntary agreement only if all the operating mineral interests covered by such agreement—(i) are in the same deposit, or are in 2 or more deposits the joint development or production of which is logical from the standpoint of geology, convenience, economy, or conservation, and (ii) are in tracts or parcels of land which are contiguous or in close proximity.