
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC616]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                     Subchapter I--Natural Resources
 
                           PART I--DEDUCTIONS
 
Sec. 616. Development expenditures


(a) In general

    Except as provided in subsections (b) and (d), there shall be 
allowed as a deduction in computing taxable income all expenditures paid 
or incurred during the taxable year for the development of a mine or 
other natural deposit (other than an oil or gas well) if paid or 
incurred after the existence of ores or minerals in commercially 
marketable quantities has been disclosed. This section shall not apply 
to expenditures for the acquisition or improvement of property of a 
character which is subject to the allowance for depreciation provided in 
section 167, but allowances for depreciation shall be considered, for 
purposes of this section, as expenditures.

(b) Election of taxpayer

    At the election of the taxpayer, made in accordance with regulations 
prescribed by the Secretary, expenditures described in subsection (a) 
paid or incurred during the taxable year shall be treated as deferred 
expenses and shall be deductible on a ratable basis as the units of 
produced ores or minerals benefited by such expenditures are sold. In 
the case of such expenditures paid or incurred during the development 
stage of the mine or deposit, the election shall apply only with respect 
to the excess of such expenditures during the taxable year over the net 
receipts during the taxable year from the ores or minerals produced from 
such mine or deposit. The election under this subsection, if made, must 
be for the total amount of such expenditures, or the total amount of 
such excess, as the case may be, with respect to the mine or deposit, 
and shall be binding for such taxable year.

(c) Adjusted basis of mine or deposit

    The amount of expenditures which are treated under subsection (b) as 
deferred expenses shall be taken into account in computing the adjusted 
basis of the mine or deposit, except that such amount, and the 
adjustments to basis provided in section 1016(a)(9), shall be 
disregarded in determining the adjusted basis of the property for the 
purpose of computing a deduction for depletion under section 611.

(d) Special rules for foreign development

    In the case of any expenditures paid or incurred with respect to the 
development of a mine or other natural deposit (other than an oil, gas, 
or geothermal well) located outside of the United States--
        (1) subsections (a) and (b) shall not apply, and
        (2) such expenditures shall--
            (A) at the election of the taxpayer, be included in adjusted 
        basis for purposes of computing the amount of any deduction 
        allowable under section 611 (without regard to section 613), or
            (B) if subparagraph (A) does not apply, be allowed as a 
        deduction ratably over the 10-taxable year period beginning with 
        the taxable year in which such expenditures were paid or 
        incurred.

(e) Cross reference

            For election of 10-year amortization of expenditures 
        allowable as a deduction under subsection (a), see section 
        59(e).

(Aug. 16, 1954, ch. 736, 68A Stat. 212; Pub. L. 94-455, title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97-248, title 
II, Sec. 201(d)(9)(C), formerly Sec. 201(c)(9)(C), Sept. 3, 1982, 96 
Stat. 420, renumbered Sec. 201(d)(9)(C), Pub. L. 97-448, title III, 
Sec. 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 99-514, 
title IV, Sec. 411(b)(2)(A), (C)(i), Oct. 22, 1986, 100 Stat. 2226; Pub. 
L. 100-647, title I, Sec. 1007(g)(7), Nov. 10, 1988, 102 Stat. 3435.)


                               Amendments

    1988--Subsec. (e). Pub. L. 100-647 substituted ``section 59(e)'' for 
``section 58(i)''.
    1986--Subsec. (a). Pub. L. 99-514, Sec. 411(b)(2)(C)(i), inserted 
reference to subsec. (d).
    Subsecs. (d), (e). Pub. L. 99-514, Sec. 411(b)(2)(A), added subsec. 
(d) and redesignated former subsec. (d) as (e).
    1982--Subsec. (d). Pub. L. 97-248 added subsec. (d).
    1976--Subsec. (b). Pub. L. 94-455 struck out ``or his delegate'' 
after ``Secretary''.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to costs paid or incurred 
after Dec. 31, 1986, in taxable years ending after such date, with 
transition rule, see section 411(c) of Pub. L. 99-514 set out as a note 
under section 263 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-248 applicable to taxable years beginning 
after Dec. 31, 1982, see section 201(e)(1) of Pub. L. 97-248, set out as 
a note under section 5 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 56, 59, 263, 263A, 291, 312, 
381, 1016, 1254 of this title.
