STATUTORY DEPLETION--SUBSIDY IN DISGUISE?
The article presents information on the difference in treatment by tax laws in various types and amount of income. As long as the income tax laws make a distinction between the taxation of ordinary income and capital gain, there is the difficult problem of determining the real nature of oil and gas as it is severed from the earth. On the other hand, the production of oil is a business and business income is considered to be ordinary income. Replacement Value, on the other hand, if oil is considered to be stock in trade, then percentage depletion provides a benefit. One method to assure the oil investor a return of his invested capital tax-free would be to charge all net profits to a reserve for depletion until the aggregate amount in the reserve equaled the amount of investment in the property; then no further depletion would be allowed. This would serve to reduce considerably the depletion now allowed the lessor. The tax laws are full of instances of differences in treatment for various types and amounts of income, due as much to political considerations as anything the. Percentage depletion is one more example of the conflict between proper determination of net income and the measurement of taxable income.
- DOI
- 10.2308/tar-7106807
- Volume
- 38 (4)
- Pages
- 776-784
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref