United States of America, and Cross-Appellee v. Pacific Clay Products, a Corporation, and Cross-Appellant

Appeal and cross-appeal in this case are from a district court judgment awarding refund of a portion of the income taxes assessed against and paid by appellee for the years 1951 and 1952. Jurisdiction in the district court is provided by 28 U.S.C. § 1346 and in this-court by 28 U.S.C. § 1291 .

On the government’s appeal the question presented is whether, for the purpose of determining taxpayer’s allowance-for mineral depletion under sections 23-(m) and 114(b) of the Internal Revenue-Code of 1939, 26 U.S.C.A. §§ 23 (m), 114-(b), the first commercially marketable products of appellee in the tax years in-question were various clays in crude form, or were, as the district court held,, partially or wholly finished products manufactured from the clays by taxpayer.

By cross-appeal appellee challenges the standard applied by the district court in determining the qualification of the six varieties of clay mined by taxpayer as “refractory and fire clay” under section-114(b) (4) (A) I.R.C.1939. The cited' section specifies depletion allowances in the following percentages of gross income, as defined, from minerals: 15 per centum for “refractory and fire clay;” 5 per centum for “brick and…