Publication 535 |
2001 Tax Year |
Development Costs
You can deduct costs paid or incurred during the tax year for
developing a mine or any other natural deposit (other than an oil or
gas well) located in the United States. These costs must be paid or
incurred after the discovery of ores or minerals in commercially
marketable quantities. Development costs include those incurred for
you by a contractor. Also, development costs include depreciation on
improvements used in the development of ores or minerals. They do not
include costs for the acquisition or improvement of depreciable
property.
Instead of deducting development costs in the year paid or
incurred, you can choose to treat them as deferred expenses and deduct
them ratably as the units of produced ores or minerals benefited by
the expenses are sold. This choice applies each tax year to expenses
paid or incurred in that year. Once made, the choice is binding for
the year and cannot be revoked for any reason.
How to make the choice.
The choice to deduct development costs ratably as the ores or
minerals are sold must be made for each mine or other natural deposit
by a clear indication on your return or by a statement filed with the
IRS office where you file your return. Generally, you must make the
choice by the due date of the return (including extensions). However,
if you timely filed your return for the year without making the
choice, you can still make the choice by filing an amended return
within 6 months of the due date of the return (excluding extensions).
Clearly indicate the choice on your amended return and write "Filed
pursuant to section 301.9100-2." File the amended return at
the same address you filed the original return.
Foreign development costs.
The rules discussed earlier for foreign exploration costs apply to
foreign development costs.
Reduced corporate deductions for development costs.
The rules discussed earlier for reduced corporate deductions for
exploration costs also apply to corporate deductions for development
costs.
Previous| First | Next
Publication Index | IRS-Forms Main | Home
|