Exploration And Development From A Taxation Standpoint

For the mining industry, the Internal Revenue Code and regulations offer a range of choices in arriving at the allowable depletion. Each case is essentially unique. Two prerequisites can optimize these opportunities: communications between the mining company's tax specialists and its technical staff; and an understanding of IRS definitions. For the latter, a logical starting point is consideration of exploration and development, since they precede production and depletion is unallowable prior to production. Criteria for selecting engineering and accounting options for exploration and development indicate the necessity of interaction between these company functions to achieve the most favorable tax position.