[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: 26CFR1.615-2]

[Page 509-510]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.615-2  Deduction of pre-1970 exploration expenditures in the 
year paid or incurred.

    (a) In general. (1) If the election to treat exploration 
expenditures under section 615 has been made or is deemed made under 
Sec. 1.615-6(b) subject to the total limitation of $100,000, a taxpayer 
who has made exploration expenditures prior to January 1, 1970, with 
respect to more than one mine or other natural deposit may deduct for a 
taxable year for which such election is effective any portion of such 
expenditures attributable to each mine or deposit. With respect to a 
particular mine or other natural deposit, a taxpayer who has made the 
election described in the preceding sentence may deduct under section 
615(a) a portion of the exploration expenditures and may defer and 
deduct under section 615(b) the balance of such expenditures. For any 
taxable year for which the election to treat exploration expenditures 
under section 615 is effective, the taxpayer must charge any amount of 
exploration expenditures in excess of $100,000 to capital account and 
must charge to capital account whatever amount has not been deducted 
currently or deferred. For example, taxpayer A who has elected under 
section 615(e) has three mines, X, Y, and Z. In the taxable year 1967, A 
makes exploration expenditures of $75,000 with respect to each mine. The 
total allowable deduction for exploration expenditures is $100,000. A 
deducts $50,000 and defers $25,000 with respect to X. He deducts 
$25,000, and charges to capital account $50,000 with respect to Y, and 
charges to capital account the entire $75,000 paid with respect to Z. 
Thus, A has deducted or deferred $100,000 and capitalized the excess.
    (2) Except as provided in section 615(e) and Sec. 1.615-6, a 
taxpayer cannot change his treatment of exploration expenditures for a 
taxable year after the due date (including extensions of time) for 
filing the return for the taxable year except where it is subsequently 
determined that any part of such exploration expenditures deducted under 
section 615(a) or deferred under section 615(b) are not exploration 
expenditures for the taxable year. Where the taxpayer has made the 
election to treat

[[Page 510]]

exploration expenditures under section 615 and it is subsequently 
determined that part of the expenditures deducted under section 615(a) 
or deferred under section 615(b), for a taxable year, were not 
exploration expenditures for such taxable year, the exploration 
expenditures required to be charged to capital account for such taxable 
year by reason of the limitation may be deducted or deferred (to the 
extent of the subsequent determination) and proper adjustment made to 
capital account. A taxpayer claiming a deduction under section 615(a) 
shall indicate clearly on his income tax return the amount of the 
deduction claimed under such section with respect to each mine or other 
natural deposit. Such mine or deposit shall be identified by an adequate 
description.

[T.D. 7192, 37 FR 12938, June 30, 1972]