Depletion Allowance For Ground Water? - A Review Of The Shurbet Case

It seems to be a matter of general understnading that title extraction or use of ground water may not be used as the basis of a depletion deduction under the United States Revenue Code And indeed, I have been unable to find any precedent upon which to base such a deduction. It is for this reason that the Shurbet case, which is the subject of my discussion and is now before the Court, may well become a precedent as authority for the allowance or disallowance of a depletion deduction for income purposes. It is well known that the law recognized that capital is consumed in the process of extracting minerals, oil and has, other natural deposits, and timber (underscoring supplied). This exhaustion, or depletion, is likened to the using up of raw materials in manufacturing. The law, therefore, provides a deduction for depletion which is intended as compensation for the exhaustion of assets consumed in the production of income through severance of minerals, oil and gas, other natural deposits, and timber.