202
72d CONGRESS . SESS. I. CA. 209. JUNE 6, 1932 . arcoM$ W
accordance with the provisions of section 218 of the Revenue 4vp 522, p. bad .
Act of 1918 or 1921) . ubstitutedaels
( 2) S UB ST IT UT ED B AS is .-The term "substituted basis" as used Determination of .
in this subsection means a basis determined under any provision Provisions governing of subsection (a) of this section or under any corresponding pr ovision of a prior income tax law, providing that the basis sh all be determined- (A) by reference to the basis in the hands of a transferor, donor, or grantor, or (B) .by reference to other property held at any time by the Basis of property .
person for whom the basis is to be determined . Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, then the adjustments provided AdJustments. in paragraph (1) of thi s subsection shall be made after first making in respect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other propert was held by the person for whom the basis is to be determine A similar rule shall be applied in the case of a series of substituted bases . tiiB nasnnd fdepleetfon SEC. 114. BASI S FOR DEPRECIATION AND DEPLETION . Depreciation . 6sma as upon sale, (a) BASIS FOR DEPRECIATION .-The basis upon which exhaustion, OW . nte, p. 20i .
wear and tear, and obsolescence are to be allowed in respect of any property shall be the adjusted basis provided in section 113(b) for the purpose of determining the gain or loss upon the sale or other Depletion,
disposition of such property . (b) BASIS FOR DEPLETION .-- toreale,eta Allowance same se (1) GENERAL RULE.-The basis upon which depletion is to be Ante, p.201 . allowed in respect of an~Y property shall be the adjusted basis Exceptions .
provided in section 11 3(p) for the purpose of determining the gain or loss upon the sale or other disposition of such property, except as provided in paragraphs (2), (3), and (4) of this Discovery Value in su bsect ion . case of mites .
(2) DISCOVERY VALUE IN CASE OF MINES.--In the case of mines (other than metal, coal or sulphur mines) discovered by the ta x- payer after February 28, 1913, the basis for depletion shall be the fa ir market value of the property at the date of discovery or Fair market value, within thirty days thereafter, if such mines were not acquired as the result of purchase of a proven tract or lease, and if the fair market value of the property is materMly disproportionate to the cost. The depletion allowance based on discovery value pro- vided in this paragraph shall not exceed 50 per centum of the net income of the taxpayer (computed without allowance for deple- tio n) from the pro perty upon whi ch the discove ry was made, Dep~etion allo ce wance to except that in no case shall the depletion allowance be less than without ref: ref: re fer en disc overy valu e .
it wouldd b e if , co mputed without reference to discovery value . Discoveries shall include minerals in commercial quantities con- M
incinaed.
tained within a vein or deposit discovered in an existing mine or mining tract by the taxpayer after February 28, 1913, if the vein or deposit thus discovered was not merely the uninterrupted extension of a continuing commercial vein or deposit already known to exist, and if the discovered minerals are of sufficient value and quantity that they could be separately mined' and marketed at a profit . Oil end gas allow
(8) PERCENTAGE DEPLETION FOR OIL AND GAS wELLS.-In the case am. of oil and gas wells the allowance for depletion shall be 271/2 per centum of the gross income from the property during the taxable Maximum .
year, excluding from suc h gross income an amount equal to any rents or royalties paid or incurred b r the taxpayer in ~ respect of
