26 C.F.R. § 1.612-2

Allowable capital additions in case of mines

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(a) In general. Expenditures for improvements and for replacements, not including expenditures for ordinary and necessary maintenance and repairs, shall ordinarily be charged to capital account recoverable through depreciation deductions. Expenditures for equipment (including its installation and housing) and for replacements thereof, which are necessary to maintain the normal output solely because of the recession of the working faces of the mine and which:

(1) Do not increase the value of the mine, or

(2) Do not decrease the cost of production of mineral units, or

(3) Do not represent an amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made shall be deducted as ordinary and necessary business expenses.

(b) Special rule. For special provisions applicable to treatment of expenditures for certain exploration and development costs (other than for the acquisition, restoration, or betterment of improvements) with respect to minerals other than oil or gas, see sections 615 and 616 and the regulations thereunder.

Notes of Decisions

Cited in 2 cases, 1971–2003 · leading case: Geoghegan & Mathis, Inc. v. Comm'r, 55 T.C. 672 (Tax Ct. 1971).

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Geoghegan & Mathis, Inc. v. Comm'r, 55 T.C. 672 (Tax Ct. 1971). · cites it 2× “Whatever may be the limits of the deductibility of expenditures *676 for exploiting rights of access in the area of open-pit mining, 3 *206 either as development expenses under section 616 or as ordinary and necessary expenses under the so-called receding-face doctrine (see sec.”

Granite Rock Co. v. United States, 243 F. Supp. 2d 1059 (N.D. Cal. 2003). “26 C.F.R. § 1.612-2 (a). In this instance, Plaintiff argues that the new conveyor belt system meets the requirements of the receding face doctrine since the system was necessitated solely as a result of the recession of the mining face.”

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