Rev. Rul. 55-78

Advice has been requested as to the processes in the manufacture of lightweight aggregate from shale and slate that are included under the term `ordinary treatment processes' as used in section 39.23(m)-1(f) of Regulations 118, and section 114(b)(4)(B) of the Internal Revenue Code of 1939.

The various treatment processes involved in the manufacture of such products are as follows:

(1) Removal of overburden

(2) Blasting with dynamite

(3) Loading on trucks

(4) Transportation to primary crusher

(5) Primary crushing

(6) Removal from primary crusher

(7) Firing in a rotary kiln

(8) Removal from kiln and cooling

(9) Crushing and screening

(10) Loading for shipment

It is held that the first six processes are `ordinary treatment processes' within the meaning of section 114(b)(4)(B) of the Code and section 39.23(m)-1(f) of Regulations 118. The furnacing, or heating in the rotary kilns, and all subsequent operations, are held to be nonmining processes.

As to the computation of the gross and net income from the property for percentage depletion purposes after the costs of mining and manufacturing have been segregated, see sections 39.23(m)-1(e) and (g) of Regulations 118