EXPENDITURES IN THE DEVELOPMENT OF MINES.

SEC. 309. EXPENDITURES IN THE DEVELOPMENT OF MINES. (a) Deduction of Expenditures.—Section 23 (relating to deductions from gross income) is hereby amended by adding at the end thereof the following new subsection: “(cc) Development of Mines.— “(1) In general.—Except as provided in paragraph (2), all expenditures paid or incurred during the taxable year for the development of a mine or other natural deposit (other than an oil or gas well) if paid or incurred after December 31, 1950, and after the existence of ores or minerals in commercially marketable quantities has been disclosed. This subsection shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation provided in section 23 (1), but allowances for depreciation shall be considered, for the purposes of this subsection, as expenditures. “(2) Election of taxpayer.—At the election of the taxpayer, made in accordance with regulations prescribed by the Secretary, expenditures described in paragraph (11 paid or incurred during the taxable year shall be treated as deferred expenses and shall be deductible on a ratable basis as the units of produced ores or minerals benefited by such expenditures are sold. In the case of such expenditures paid or incurred during the development stage of the mine or deposit, the election shall apply only with respect to the excess of such expenditures during the taxable year over the net receipts during the taxable year from the ores or minerals produced from such mine or deposit. The election under this paragraph, if made, must be for the total amount of such expenditures, or the total amount of such excess, as the case may be, with respect to the mine or deposit, and shall be binding for such taxable year. “(3) Adjusted basis of mine or deposit.—The amount of expenditures which are treated under paragraph (2) as deferred 65 Stat. 487 expenses shall be taken into account in computing the adjusted basis of the mine or deposit, except that such amount, and the adjustments to basis provided in section 113 (b) (1) (J), shall be disregarded in determining the adjusted basis of the property for the purpose of computing a deduction for depletion under section 114.” (b) Adjusted Basis for Determining Gain or Loss Upon Sale or Exchange.—Section 113 (b) (1) (relating to adjusted basis of property) is hereby amended by adding at the end thereof the following subparagraph: “(J) for amounts allowed as deductions as deferred expenses under section 23 (cc) (2) (relating to certain expenditures in the development of mines) and resulting in a reduction of the taxpayer’s taxes under this chapter, but not less than the amounts allowable under such section for the taxable year and prior years.” (c) Technical Amendment.—Section 24 (a) (2) (relating to items not deductible) is hereby amended by adding after the word “estate” the following: “, except expenditures for the development of mines or deposits deductible under section 23 (cc) (d) Effective Date.—The amendments made by this section shall be applicable to taxable years ending after December 31, 1950.