Rev. Rul. 55-700

Consideration has been given to whether dolomite is entitled to the 10 percent depletion rate prescribed by section 114(b)(4) of the Internal Revenue Code of 1939, notwithstanding that it is used or sold for use as metallurgical grade, or chemical grade limestone, or as common stone.

Section 114(b)(4) of the Code provides a percentage depletion allowance of 5 percent for `stone,' 10 percent for `dolomite,' and 15 percent for `metallurgical grade limestone' and `chemical grade limestone.' In Section 39.23(m)-5 of Regulations 118, `stone' is defined as `all common dimension, crushed or broken stone within the ordinary meaning of these terms'; `limestone, chemical grade' is defined as `limestone used or sold for use in the chemical trade'; and `limestone, metallurgical grade' is defined as `limestone used or sold for use in the production of metals.' The regulations do not define the term `dolomite.'

Although there is no clear line of distinction between limestone and dolomite, as one grades into the other in relation to the amount of magnesium that it contains, the term `dolomite' has a definite mineralogical meaning. The mineral dolomite ((CaMg) CO 3 ), i.e. , within its strict mineralogical meaning, is not very common. However, the term `dolomite' has a broad commercial meaning, applying to a wide range of calcium-magnesium carbonates in which the percentages of the carbonates of calcium and magnesium vary from those in the mineral dolomite in its strict mineralogical sense, namely 54.2 percent calcium carbonate and 45.8 percent magnesium carbonate, to almost no magnesium carbonate and nearly all calcium carbonate.

While it seems improbable that Congress intended to limit the term `dolomite' to the pure mineral dolomite as distinguished from dolomite commonly used in commerce, Congress manifestly did not intend to classify a limestone as dolomite merely because it contains some magnesium. If the latter were intended, limestone relatively high in magnesium content and used in the production of metals would be denied the 15 percent rate of depletion allowed for `metallurgical grade limestone' and would be limited to 10 percent depletion as `dolomite' or `magnesite' (MgCO 3 ). On the other hand, a limestone, either high or low in magnesium content, that is used as crushed stone on roads or as concrete aggregate, would be allowed 10 percent depletion instead of the 5 percent allowed on `stone.' In other words, employment of the end-use test is inherently necessary, and therefore was intended, where several natural deposits are specifically named in a statute which provides that each is entitled to percentage depletion at a different rate, but they can not be distinguished so as to effectuate that statutory purpose unless such test is employed.

The use of rock as concrete aggregate, common dimension, or crushed or broken stone, does not primarily depend on its mineralogical or chemical content or composition but on its physical characteristics. Since section 114(b)(4) of the Code specifically names `stone' as entitled to a 5 percent depletion rate. Dolomite, regardless of its chemical composition, that is used or sold for use as common dimension, or crushed or broken stone, within the ordinary meaning of those terms, is considered to be stone on which the rate of percentage depletion allowable is limited to 5 percent. Conversely, on limestone used or sold for use as metallurgical grade limestone, such as for blast furnace flux, or as chemical grade limestone, such as for the manufacture of lime, the 15 percent rate for percentage depletion purposes is allowable.

The above principle is equally applicable to other natural deposits specifically named in the statute if they are used or sold for use by a mine owner or operator as concrete aggregate or common dimension, or crushed or broken stone. See, generally, Rev. Rul. 54-443 and 54-550, C.B. 1954-2, 164. Compare Rev. Rul. 55-67, C.B. 1955-1, 357