§611 — Title 26 Internal Revenue Code | U.S. Code

Summary

If you own mines, oil and gas wells, other natural deposits, or timber, you can deduct a reasonable allowance for depletion, which accounts for the resource being used up, along with depreciation of improvements. The allowance is set under IRS regulations based on the conditions of each property. If later work shows the recoverable amount is bigger or smaller than first estimated, the estimate is revised and future deductions use the new figure. The deduction gets divided when ownership is shared. For leased property it is split fairly between landlord and tenant. A life tenant takes the whole deduction as if they owned the property outright, and for trusts and estates it is divided based on who receives the income.

Title 26, §611

Internal Revenue Code — Source: USLM XML via OLRC

(a)In 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)(1)In the case of a lease, the deduction under this section shall be equitably apportioned between the lessor and lessee.

(2)In 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)In 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)In 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)For other rules applicable to depreciation of improvements, see section 167.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1976—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.

§611 Allowance of Deduction for Depletion