Rev. Rul. 85-10

1985-1 C.B. 180, 1985-6 I.R.B. 13.

PERCENTAGE DEPLETION; GROSS INCOME FROM PROPERTY; GEOTHERMAL STEAM WELLS

Published: February 11, 1985

Section 613.-Percentage Depletion, 26 CFR 1.613-3: Gross income from the property.

  Percentage depletion; gross income from property; geothermal steam wells. Gross income from property is computed in the same manner for geothermal steam wells as for oil and gas wells for percentage depletion purposes.

ISSUE

  Whether gross income from the property is computed in the same manner for geothermal steam wells as for oil and gas wells for percentage depletion purposes.

LAW

  Section 1.613(a) of the Internal Revenue Code allows percentage depletion based on the gross income from the property in the case of mines, wells and other natural deposits listed in section 613(b). Section 613(e) of the Code states that geothermal deposits are included in section 613(b).

  Section 613(a) of the Income Tax Regulations provides that in the case of oil and gas; wells gross income from the property means the amount for which the taxpayer sells the oil or gas in the immediate vicinity of the well. If the oil or gas is not sold on the premises but is manufactured or converted into a refined product prior to sale, or is transported from the premises prior to sale, the gross income from the property shall be assumed to be equivalent to the representative market of field price of the oil or gas before conversion or transportation. This regulation applies equally to geothermal deposits.

HOLDING

  Gross income from the property is computed in the same manner for geothermal steam wells as for oil and gas wells for percentage depletion purposes.

Rev. Rul. 85-10, 1985-1 C.B. 180, 1985-6 I.R.B. 13.