Rev. Rul. 55-390

Where the main objective of mining granite or marble is the production of rough blocks, the mining process ends when the rough blocks of granite or marble produced at the quarry are shipped or transferred for sawing, shaping, and polishing. However, if the taxpayer incidentally produces and sells crushed granite or marble as a by-product of mining at the mine or quarry, amounts received for such production may be included in gross income subject to percentage depletion. When, because of subsequent operations, it is necessary to resort to the proportionate profits method (section 39.23(m)-1(e)(3) and section 39.23(m)-1(g) of Regulations 118) to determine the gross and net income from mining, any income from such byproducts incident to operations subsequent to mining must be included in determining the overall profits to be allocated to mining and nonmining activities