[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 630]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.9004-2  Effect of election.

    (a) In general. If a taxpayer makes the election described in 
paragraph (b) of Sec.  1.9004-1, he shall be deemed to have consented to 
the application of the Act with respect to all the clay and shale 
described in that paragraph for all taxable years for which the election 
is effective whether or not the taxpayer is litigating the issue for any 
of such years. Thus, in applying section 613 of the Internal Revenue 
Code of 1954 (and corresponding provisions of the Internal Revenue Code 
of 1939) to those years:
    (1) The ``gross income from the property'' for purposes of section 
613(c) of the Internal Revenue Code of 1954 (and corresponding 
provisions of the Internal Revenue Code of 1939) shall be 50 percent of 
the amount for which the mineowner or operator sold, during the taxable 
year, the building or paving brick, drainage and roofing tile, sewer 
pipe, flower pots, and kindred products manufactured from the clay and 
shale described in paragraph (b) of Sec.  1.9004-1, but shall not exceed 
an amount equal to $12.50 multiplied by the number of short tons of all 
such clay or shale mined and used by the mineowner or operator in the 
manufacture of the products sold during the taxable year; and
    (2) The ``taxable income from the property'' (computed without 
allowance for depletion) for purposes of section 613(a) of the Internal 
Revenue Code of 1954 (and corresponding provisions of the Internal 
Revenue Code of 1939) shall be 50 percent of the taxable income from the 
manufactured products sold during the taxable year (computed without 
allowance for depletion).
    (b) Effect on depletion rates and other items. The election shall 
have no effect on the applicable rate of percentage depletion for the 
taxable years to which the election is effective. In applying the 
election to the years affected there shall be taken into account the 
effect that any adjustments resulting from the election shall have on 
other items affected thereby, such as charitable contributions, foreign 
tax credit, net operating loss, and the effect that adjustments to any 
such items shall have on other taxable years. The provisions of the Act 
are applicable with respect to taxable years subject to the Internal 
Revenue Code of 1939 for purposes of applying sections 450 and 453 of 
that Code.


(75 Stat. 674; 26 U.S.C. 613 note)

[T.D. 6575, 26 FR 9632, Oct. 12, 1961]