ISSN:
1745-6584
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Energy, Environment Protection, Nuclear Power Engineering
,
Geosciences
Notes:
The Shurbet Case established that ground water is a natural resource subject to depletion. That decision was restricted to water extracted from the Ogallala formation on the Southern High Plains of Texas and New Mexico. The unique features of the Ogallala formation on the Southern High Plains are that (1) the reservoir serves a significant geographic area which has no other source of water, (2) the recharge of the reservoir is from a single predictable source, and (3) the artificial discharge caused by pumpage produces a permanent reduction in the water available for use.In order to claim a depletion deduction, the taxpayer must (1) determine the cost of the water, (2) determine the quantity of water available at the time of acquisition, and (3) determine the quantity of water exhausted during the year. The procedures developed for use in the Shurbet Case have been accepted by the Internal Revenue Service for use in establishing the cost, quantity, and usage of water.In deciding who can claim a depletion deduction for the use of ground water, four factors must be considered. They are: (1) legal, (2) geologic, (3) economic, and (4) procedural. The taxpayer must have an economic interest in the water, and the water must be a depletable deposit. The geology and hydrology must be similar to the Southern High Plains. The taxpayer must have a cost basis in the water and must produce income from its sale or use. The taxpayer must prove that he sustained depletion.Although the Shurbet decision has been confined to the Southern High Plains, it seems that similar conditions may exist in other areas and that water users should be made aware of the potential tax saving arising from the depletion deduction.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1745-6584.1973.tb02989.x
Permalink