Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 60-98

1960-1 C.B. 252

Sec. 613

IRS Headnote

Where a mine operator sells his product through a del credere sales agent, the full sales price, unreduced by the sales commission, is the `gross income from the property' for purposes of percentage depletion under section 613(c) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 60-98

Advice has been requested whether amounts paid del credere sales agents should be included in the computation of `gross income from the property' for percentage depletion purposes under section 613(c) of the Internal Revenue Code of 1954.

Under the usual contracts between sales agents and mine operators, which do not involve a del credere agency, the agent is required to account to the operator for the full purchase price. However, he is permitted to deduct his `commissions' before remitting the balance. Shipment of the product is made direct from the operator to the purchaser in accordance with the order obtained by the agent.

The agent neither gains possession of the product nor guarantees payment of the accounts.

One provision may be found in some contracts which may tend to cast doubt on whether the relationship is an agency relationship. Under this provision the sales agent guarantees payment of all his sales accounts and is authorized to collect such accounts by suit in his own name. The sales agent does not usually agree to pay as the purchaser, but merely as the guarantor. This is an obligation often undertaken by an agent under a special contract which gives rise to a del credere agency.

Under a del credere agency the agent has the duty to pay the principal what the purchaser fails to pay, whether or not this is due to insolvency of the purchaser or to other causes. The person does not cease to be an agent, neither does the principal lose title to the goods or their proceeds or the right to pursue the purchaser for the price. Therefore, an agent selling under the above mentioned provision is a del credere agent and the sales made by him are sales by the operator through the agent.

Accordingly, it is held that where a mine operator sells his product through a del credere sales agent, the full selling price, unreduced by the sales commission, should be included in the computation of `gross income from the property' for percentage depletion purposes under section 613(c) of the code.