[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.611-5]

[Page 403-404]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.611-5  Depreciation of improvements.

    (a) In general. Section 611 provides in the case of mines, oil and 
gas wells, other natural deposits, and timber that there shall be 
allowed as a deduction a reasonable allowance for depreciation of 
improvements. Such allowance shall include exhaustion, wear and tear, 
and obsolescence. The deduction allowed under section 611 shall be 
determined under the provisions of section 167 and the regulations 
thereunder. For purposes of section 167 the unit of production method 
may, under appropriate circumstances, be considered a reasonable method 
under section 167(a), and therefore, not subject to the limitations 
prescribed by section 167(b).
    (b) Special rules for mines, oil and gas wells, other natural 
deposits and timber. (1) For principles governing the apportioning of 
depreciation allowances under sections 611 and 167 in the case of 
property held by one person for life

[[Page 404]]

with remainder to another or in the case of property held in trust or by 
an estate, see Sec. 1.167(h)-1.
    (2) A reasonable allowance for depreciation on account of 
obsolescence or decay shall be required in an appropriate case during 
periods when the improvement is not used in production or is used in 
producing at a rate below its normal capacity. This rule is applicable 
whether or not the taxpayer uses the unit of production method.
    (3) See sections 615 and 616 and the regulations thereunder for 
special rules for treatment of allowances for depreciation of 
improvements with respect to the exploration and development of a mine 
or other natural deposit (other than oil or gas).
    (4) In the case of operating oil or gas properties, the deduction 
for depreciation shall be allowed for those costs of improvements such 
as machinery, tools, equipment, pipes, and other similar items and the 
costs of installation which are not treated as a deductible expense 
under section 263(c). See Sec. 1.612-4.
    (c) Accounting and recordkeeping. See Sec. 1.167(a)-7 for 
accounting and recordkeeping requirements for taxpayers claiming 
deductions under section 611 and this section.

[T.D. 6500, 25 FR 11737, Nov. 26, 1960, as amended by T.D. 6712, 29 FR 
3655, Mar. 24, 1964; T.D. 6836, 30 FR 8902, July 15, 1965]