View all text of Part I [§ 611 - § 617]
§ 614. Definition of property
(a) General rule
(b) Special rules as to operating mineral interests in oil and gas wells or geothermal deposits
In the case of oil and gas wells or geothermal deposits—
(1) In general
Except as otherwise provided in this subsection—
(A) all of the taxpayer’s operating mineral interests in a separate tract or parcel of land shall be combined and treated as one property, and
(B) the taxpayer may not combine an operating mineral interest in one tract or parcel of land with an operating mineral interest in another tract or parcel of land.
(2) Election to treat operating mineral interests as separate properties
If the taxpayer has more than one operating mineral interest in a single tract or parcel of land, he may elect to treat one or more of such operating mineral interests as separate properties. The taxpayer may not have more than one combination of operating mineral interests in a single tract or parcel of land. If the taxpayer makes the election provided in this paragraph with respect to any interest in a tract or parcel of land, each operating mineral interest which is discovered or acquired by the taxpayer in such tract or parcel of land after the taxable year for which the election is made shall be treated—
(A) if there is no combination of interests in such tract or parcel, as a separate property unless the taxpayer elects to combine it with another interest, or
(B) if there is a combination of interests in such tract or parcel, as part of such combination unless the taxpayer elects to treat it as a separate property.
(3) Certain unitization or pooling arrangements
(A) In general
Under regulations prescribed by the Secretary, if one or more of the taxpayer’s operating mineral interests participate, under a voluntary or compulsory unitization or pooling agreement, in a single cooperative or unit plan of operation, then for the period of such participation—
(i) they shall be treated for all purposes of this subtitle as one property, and
(ii) the application of paragraphs (1), (2), and (4) in respect of such interests shall be suspended.
(B) Limitation
Subparagraph (A) shall apply to a voluntary agreement only if all the operating mineral interests covered by such agreement—
(i) are in the same deposit, or are in 2 or more deposits the joint development or production of which is logical from the standpoint of geology, convenience, economy, or conservation, and
(ii) are in tracts or parcels of land which are contiguous or in close proximity.
(4) Manner, time, and scope of election
(A) Manner and time
(B) Scope
(c) Special rules as to operating mineral interests in mines
(1) Election to aggregate separate interests
Except in the case of oil and gas wells and geothermal deposits, if a taxpayer owns two or more separate operating mineral interests which constitute part or all of an operating unit, he may elect (for all purposes of this subtitle)—
(A) to form an aggregation of, and to treat as one property, all such interests owned by him which comprise any one mine or any two or more mines; and
(B) to treat as a separate property each such interest which is not included within an aggregation referred to in subparagraph (A).
For purposes of this paragraph, separate operating mineral interests which constitute part or all of an operating unit may be aggregated whether or not they are included in a single tract or parcel of land and whether or not they are included in contiguous tracts or parcels. For purposes of this paragraph, a taxpayer may elect to form more than one aggregation of operating mineral interests within any one operating unit; but no aggregation may include any operating mineral interest which is a part of a mine without including all of the operating mineral interests which are a part of such mine in the first taxable year for which the election to aggregate is effective, and any operating mineral interest which thereafter becomes a part of such mine shall be included in such aggregation.
(2) Election to treat a single interest as more than one property
(3) Manner and scope of election
The elections provided by paragraphs (1) and (2) shall be made, in accordance with regulations prescribed by the Secretary, not later than the time prescribed for filing the return (including extensions thereof) for the first taxable year—
(A) in which, in the case of an election under paragraph (1), any expenditure for development or operation in respect of the separate operating mineral interest is made by the taxpayer after the acquisition of such interest, or
(B) in which, in the case of an election under paragraph (2), expenditures for development or operation of more than one mine in respect of a property are made by the taxpayer after the acquisition of the property.
An election made under paragraph (1) or (2) for a taxable year shall be binding upon the taxpayer for such year and all subsequent taxable years, except that the Secretary may consent to a different treatment of any interest with respect to which an election has been made.
(d) Operating mineral interests defined
(e) Special rule as to nonoperating mineral interests
(1) Aggregation of separate interests
(2) Nonoperating mineral interests defined
(Aug. 16, 1954, ch. 736, 68A Stat. 210; Pub. L. 85–866, title I, § 37(a)–(d), Sept. 2, 1958, 72 Stat. 1633–1637; Pub. L. 88–272, title II, § 226(a), (b), Feb. 26, 1964, 78 Stat. 94, 96; Pub. L. 94–455, title XIX, §§ 1901(a)(87)(A)(i), (B), (C), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1779, 1834; Pub. L. 95–618, title IV, § 403(a)(2)(C), (D), Nov. 9, 1978, 92 Stat. 3204; Pub. L. 101–508, title XI, § 11522(b)(2), Nov. 5, 1990, 104 Stat. 1388–486; Pub. L. 113–295, div. A, title II, § 221(a)(65), Dec. 19, 2014, 128 Stat. 4048.)