George Sutherland

“ True, the value of the mine is lessened from the partial exhaustion of the property, and, owing to its peculiar character, cannot be replaced. But in no accurate sense can such exhaustion of the body of the ore be deemed depreciation. It is equally true that there seems to be a hardship in taxing such receipts as income, without some deduction arising from the fact that the mining property is being continually reduced by the removal of the minerals. ”

“ The general provision in section 12 (a) , Second, is that the deduction from gross income shall include a reasonable allowance for the 'exhaustion * * * of property.' There is nothing to suggest that the word 'property' is used in any restricted sense. In the case of mines, a specific kind of property, the exhaustion is described as depletion, and is limited to an amount not exceeding the market value in the mine of the product mined and sold during the year. ”

“ The lower court thought that the case of the lessor (Sargent Land Company) was to be distinguished from that of the lessee (Biwabik Mining Company) upon the theory that, while the royalties paid to the former might properly be called income, the receipts of the latter resulted from the sale of capital assets and were not income. But this court rejected the assumed distinction as unsound and decided the case upon that point without referring to the question of deduction on account of depreciation. ”