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Revenue Ruling

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 Rev. Rul. 65-7

1965-1 C.B. 254

IRS Headnote

Saline minerals extracted from the waters of the Great Salt Lake are not subject to the allowance for depletion since such minerals are obtained from an inexhaustible source similar to sea water.

Full Text

Rev. Rul. 65-7

Advice has been requested whether saline minerals extracted from the waters of the Great Salt Lake in Utah are subject to the allowance for depletion.

Section 611(a) of the Internal Revenue Code of 1954 provides, in part, that, 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; such reasonable allowance in all cases to be made under regulations prescribed by the Secretary of the Treasury or his delegate.

Section 1.611-1(d)(4) of the Income Tax Regulations states, in part, that `mineral deposit' refers to minerals in place. In accordance with section 1.611-1(d)(5) of the regulations, `minerals' includes ores of the metals, coal, oil, gas, and all other natural metallic and nonmetallic deposits except minerals derived from sea water, the air, or from similar inexhaustible sources.

The amount of saline minerals available as dissolved chemical compounds in the water of the Great Salt Lake is being continuously increased each year from the dissolved salts carried in by streams. Consequently, the saline minerals contained in such water are virtually inexhaustible and from a source similar in that respect to sea water. Therefore, those saline minerals do not constitute `minerals,' as such, within the scope of section 1.611-1(d)(5) of the regulations.

Accordingly, it is held that saline minerals extracted from the waters of the Great Salt Lake are not subject to an allowance for depletion since such minerals are obtained from an inexhaustible source similar to sea water.