United States v. Light Aggregates, Inc.

343 F.2d 429 (8th Cir. 1965) · United States Court of Appeals for the Eighth Circuit · April 6, 1965 · No. No. 17694

Summary

The Eighth Circuit addressed the proper depletion allowance for shale mined and processed by Light Aggregates, Inc. under the Internal Revenue Code. Applying United States v. Cannelton Sewer Pipe Co. and related precedent, the court held that the depletion calculation must be based on the raw shale before kiln processing, rather than on sales of the finished lightweight aggregate, and reversed the district court.

Holdings

  1. For purposes of the percentage depletion allowance, the raw shale immediately before kiln processing was the first commercially marketable mineral product because it was suitable for industrial use or consumption at that point. The taxpayer's lack of actual sales of raw shale did not establish that no market existed.
  2. The kiln heating and subsequent processing did not extend the mining stage because the raw shale had already become suitable for industrial use or consumption before kiln treatment. The district court therefore applied an erroneous legal concept in treating all of the taxpayer's processes as mining.

Questions Presented

  1. Whether the commercially marketable mineral product for purposes of the percentage depletion allowance was the raw shale immediately before kiln processing or the finished lightweight aggregate.
  2. Whether the kiln heating, crushing, and screening processes constituted ordinary treatment processes included within mining under Internal Revenue Code § 613(c)(2).

Disposition

reversed

Cases Cited (11)

  • United States v. Cannelton Sewer Pipe Co., 364 U.S. 76, 80 S. Ct. 1581, 4 L. Ed. 2d 1581 (1960)(followed)
  • Riddell v. Monolith Portland Cement Co., 301 F.2d 488 (9th Cir. 1962), summarily reversed, 371 U.S. 537, 83 S. Ct. 378, 9 L. Ed. 2d 492 (1963)(followed)
  • Virginia Greenstone Co. v. United States, 308 F.2d 669 (4th Cir. 1962)(followed)
  • Morton Salt Co. v. United States, 316 F.2d 931 (Ct. Cl. 1963), cert. denied, 375 U.S. 951, 84 S. Ct. 442, 11 L. Ed. 2d 312 (1963)(followed)
  • United States v. Longhorn Portland Cement Co., 328 F.2d 491 (5th Cir. 1964)(followed)
  • C.I.R. v. Hallquist, 291 F.2d 49 (7th Cir. 1961), cert. denied, 368 U.S. 930, 82 S. Ct. 367, 7 L. Ed. 2d 193 (1961)(followed)
  • Standard Realization Co. v. United States, 289 F.2d 247 (7th Cir. 1961)(followed)
  • United States v. Portland Cement Co. of Utah, 338 F.2d 798 (10th Cir. 1964)(followed)
  • Riddell v. California Portland Cement Co., 297 F.2d 345 (9th Cir. 1962)(followed)
  • Riddell v. Victorville Lime Rock Co., 292 F.2d 427 (9th Cir. 1961)(followed)

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