Talache Mines Inc. v. United States

This appeal involves federal income taxes (a deficiency assessment of $22,-773.22 paid in 1946). Appellant sued for a refund after the Commissioner had rejected a claim therefor, and the lower court sustained the assessment and dismissed appellant’s action. This appeal followed. The findings, conclusions and order for judgment of the lower court are set out in Talache Mines, Inc., v. United States, D.C., 108 F.Supp. 25 .

A preliminary reference to the facts will be helpful. In 1917 and 1918, appellant acquired the Idaho mining properties referred to in the lower court’s opinion but did not place these properties in production until 1922. It operated them until 1926 and thereafter leased them until the year 1941. Appellant’s claim is that in 1942 it permanently abandoned and discarded these properties because unforeseen changes in business conditions terminated their usefulness and made them valueless to appellant. In its complaint below it averred that since this abandonment it has never used said properties in its (mining) business nor for any purpose, nor has any other person mined said property or removed mineral products therefrom.

Appellant claimed a deduction in its 1942…

(dissenting).

It seems to me that the majority opinion overlooks the fact that we deal here with a question of loss by abandonment as that term is used under the income tax regulations, not with the subject of forfeiture or abandonment of mining claims which is something quite different. The tax regulation which controls here is Regulations 111, § 29.23(e) 3, as follows:

That regulation is one which has been in effect in substantially the same form for so many years and during so many revisions of the Internal Revenue Code that it has the effect of law.

When the provisions of that regulation are applied to the facts admitted and found here, it fits like a glove. In 1942 the mine workings and the old deposits suddenly and entirely lost their usefulness in the taxpayer’s business. As the trial court found, the economic consequences of the war were such that “the mining properties could not profiit-ably be operated in 1942”. In that year it was unable either to lease or sell the mine. In the same year it removed the steel rails, hoist, locomotive, cars and all other machinery and equipment, and the mine was allowed to cave in. These findings of the court disclosed that the…