United States v. Dakota-Montana Oil Co., 288 U.S. 459 (1933)

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United States v. Dakota-Montana Oil Co.

No. 434

Argued February 8, 1933
Decided March 13, 1933
288 U.S. 459

CERTIORARI TO THE COURT OF CLAIMS

Syllabus

Section 234(a)(8) of the Revenue Act of 1926, provides that, in the case of oil wells, the taxpayer shall have, as a deduction from gross income, "a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions of each case," to be made under departmental rules and regulations. Section 204 permits the taxpayer to calculate depletion on the basis of cost alone, or else to deduct an arbitrary allowance, fixed by the statute, without reference to cost or discovery value at 27% of gross income from the well. Held, construing these in the light of earlier provisions and administrative construction, that the capitalized cost of drilling, as distinguished from cost of physical property such as machinery, tools, equipment, pipes, etc., is subject to depletion allowance, and not to depreciation allowance. Pp. 460, 466.

59 F.2d 853, reversed.

Certiorari, 287 U.S. 591, to review a judgment against the United States on a claim for money collected as income taxes.