Rev. Rul. 60-103

Advice has been requested whether the elections to defer or to expense exploration and development expenditures under sections 615 and 616 of the Internal Revenue Code of 1954 for taxable years prior to the current taxable year may be exercised by filing a statement with the District Director of Internal Revenue indicating such election.

Sections 615 and 616 of the Code provided for the deduction of certain expenditures paid or incurred in connection with the exploration and development of a mine or other natural deposit, other than oil or gas.

For the current and future taxable years, sections 1.615-3 and 1.616-2 of the Income Tax Regulations provide that the elections shall be made for each mine or deposit by a clear indication on the return or by a statement filed with the District Director with whom the return was filed, not later than the time prescribed by law for the filing of such return (including extensions thereof) for the taxable year to which such elections are applicable.

For prior taxable years governed by the 1954 Code for which the statute of limitations has not expired, sections 1.615-5 and 1.616-3 of the regulations provided that the time for making the elections to deduct or to defer exploration or development expenditures for such years shall expire on the first day of the first month which begins more than ninety days after the regulations adopted under sections 615 and 616 are published in the Federal Register. The regulations were published in the Federal Register for January 21, 1960. Therefore, the last possible date for making the elections for such prior years is May 2, 1960 (since the 90-day period expires on Sunday, May 1st).

These sections afford the taxpayer an extension of time in which to exercise the elections with respect to prior taxable years governed by the 1954 Code on which the statute of limitations will not expire prior to May 2, 1960. The extension of time is applicable with respect to deductions of exploration and development expenditures under sections 615(a) and 616(a) of the Code, as well as the deferment of such expenditures under sections 615(b) and 616(b) of the Code.

In nearly all instances any election made at this time with respect to a prior year's return will result in either a deficiency or an overpayment. Therefore, the mere filing of a statement of election with the District Director will not be suffcient to effect the necessary recomputations.

Accordingly, it is held that for prior taxable years governed by the 1954 Code for which the statute of limitations has not expired a change in election shall be made by filing an amended return or a claim for refund.