shall be redetermined; and the amount of tax due upon such redetermi- ART. 181. Scope of provision for amortization.-All allowances made to a taxpayer by a contracting department of the Government, or by any other contractor, for amortization or fall in the value of property, whether such allowances were made as a part of the price of the product or in settlement of claims arising out of the cancellation or termination of contracts, shall be included in gross income. All payments arising out of the settlement of such claims shall be included. in the accrued income of the taxable year in which such cancellation or termination (whether formal or informal) occurred. The amount of amortization to be allowed as a deduction from gross income, for the purpose of the tax, shall be computed in accordance with the provisions of articles 181 to 189, pursuant to which the deduction must be made, and not upon the basis of any amounts contractually or otherwise determined. ART. 182. Depreciation of amortized property.-The allowance for amortization shall be inclusive of all depreciation during the amortization period on property subject to amortization. (See art. 186.) Depreciation will be allowed, beginning at the close of the amortization period, upon property the cost of which has been partly amortized. Depreciation on partly amortized property shall be based on the value of such property after the amortization allowance has been deducted. Property which has been amortized to its scrap value shall not further be subject to depreciation. ART. 183. Property cost of which may be amortized.-The taxpayer may deduct from gross income a reasonable allowance for amortization; such deduction not to be in excess of the cost of buildings, machinery, equipment or other facilities constructed, erected, installed, or acquired on or after April 6, 1917, for the production of articles contributing to the prosecution of the present war, or of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war. In the case of property the construction, erection, installation, or acquisition of which was commenced before April 6, 1917, and completed subsequent to that date, amortization will be allowed with respect only to that part of the cost incurred on or after April 6, 1917, and which was properly entered on the books of the taxpayer on or after that date. ART. 184. Cost which may be amortized.—The total amount subject to amortization shall be the difference between the original cost of the property if constructed, erected, installed, or acquired on or after April 6, 1917; or if acquired partly before and partly after April 6, 1917, then that part of the cost incurred on or after April 6, 1917, and properly entered on the books of the taxpayer on or after that date, less any amounts deducted for depreciation, losses, etc., prior to January 1, 1918, and the value of the property on either of the bases indicated below: (1) In the case of property useful to the taxpayer only during the period of its operation as a war facility and which has been sold or permanently discarded, or which will be sold or permanently discarded within three years after the termination of the war; the value shall be the actual sale price or estimated fair market value as of the date when the property was or will be permanently discarded. such fair market value to be reestablished at and as of the time of the investigation by engineers of the Bureau of Internal Revenue. (2) In the case of property not included in (1) above, the value shall be the estimated value to the taxpayer in terms of its actual use or employment in his going business; such value to be not less than the sale or salvage value of the property: Provided, however, That for the purposes of returns made in 1919, the preliminary estimate of the amount of such amortization shall not, in any case, have exceeded 25 per cent of the cost of the property. In the determination, by engineers of the Bureau of Internal Revenue, of the proper amortization allowance, the estimated value to the taxpayer of the property in terms of its actual use or employment in his going business, shall be as of the time of such determination. In the final determination, the amount of the amortization allowance will be ascertained upon the basis of stable post-war conditions under regulations to be promulgated when these conditions become apparent. Special record of all property falling in (1) above, must be preserved by the taxpayer, and the Commissioner must be promptly notified (a) if, after having been in good faith permanently discarded or dismantled, property shall in any case be restored to use because of conditions not foreseen or anticipated at the time it was discarded; or (b) of the selling price, if sold. ART. 185. Amortization period.-The amortization allowance shall be spread in proportion to the net income (computed without benefit of the amortization allowance) between January 1, 1918 (or if the property was acquired subsequent to that date, January 1st of the year in which acquired) and either of the following dates: (a) If the claim is based on (1) of article 184, the date when the property was or will be sold or permanently discarded as a war facility; or (b) if the claim is based on (2) of article 184, the actual or estimated date of cessation of operation as a war facility. All taxpayers claiming an allowance for amortization shall compute (or, to the extent that accurate computations can not be made, shall estimate) the amount of their net income for the period between January 1, 1918, and the dates specified above, and shall also compute (or estimate as above) that part thereof properly assignable to each of the calendar years falling within the amortization period; and the amount of income so computed or estimated shall be the basis for apportioning the amounts of amortization appliE cable to each of the calendar years affected. Taxpayers reporting on the fiscal year basis shall (a) in all computations based upon 1918 rates for fiscal years ending in 1918 and 1919, use the amount of such allowance apportioned to the calendar year 1918; (b) in all computations based upon 1919 rates for a year beginning in 1918 and ending in 1919, use the amount of such allowance apportioned to the calendar year 1919; and (c) in all computations for subsequent fiscal years, use the number of twelfths of the allowance apportioned to each calendar year falling within such fiscal year that there are months of such calendar year falling within such fiscal year. ART. 186. Additional requirements for amortization.-Claims for amortization must be unmistakably differentiated in the return from all other claims for wear, tear, obsolescence and loss. No such claim. will be allowed unless it is reflected in any accounts submitted by the taxpayer to stockholders and in any credit statements by the taxpayer to banks, and is given full effect on his financial books of account. If Government or other contracts taken by the taxpayer contained recognition of amortization as an element in the cost of production, copies of such contracts shall be filed with the taxpayer's return, together with a statement and description of any sums received on account of amortization and the basis upon which they were determined. In any case in which an allowance has been made for amortization of cost the taxpayer will not be allowed to restore to his invested capital for the purpose of the war profits and excess profits tax any portion of the amount covered by such allowance. ART. 187. Redetermination of amortization allowance.-A redetermination of the deduction allowed on account of amortization may, or at the request of the taxpayer shall, be made by the Commissioner at any time within three years after the termination of the present war, and if as a result of an appraisal or from other evidence it is found that the deduction originally allowed was incorrect, the amount of tax due for each taxable year during the amortization period will be adjusted by additional assessment or by refund. ART. 188. Sale of amortized property.-In the case of the bona fide sale of amortized property before three years from the termination. of the war, the sale price thereof will be considered as reflecting the correctness or incorrectness of the amortization allowance made, due allowance being made for depreciation sustained since the close of the amortization period. ART. 189. Information to be furnished by the taxpayer.-The taxpayer's claim for amortization must be complete and comprehensive in all respects. The Commissioner will not entertain claims which do not clearly set forth full data with respect to the property which it is desired to amortize. To assist the taxpayer in compiling this information the Commissioner has prepared Guide Form 1007-M, which explains in detail the manner in which claims for amortization should be presented. A copy of this guide form will be furnished to the taxpayer upon application to the Commissioner. DEDUCTIONS ALLOWED: DEPLETION. [SEC. 214. (a) That in computing net income there shall be allowed as deductions:] (10) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case, based upon cost including cost of development not otherwise deducted: Provided, That in the case of such properties acquired prior to March 1, 1913, the fair market value of the property (or the taxpayer's interest therein) on that date shall be taken in lieu of cost up to that date: Provided further, That in the case of mines, oil and gas wells, discovered by the taxpayer, on or after March 1, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the property is materially disproportionate to the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within thirty days thereafter; such reasonable allowance in all the above cases to be made under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee; * * ART. 201. Depletion of mines, oil and gas wells; depreciation of improvements. Sections 214 (a) (10) and 234 (a) (9) provide that taxpayers shall be allowed as a deduction in computing net income in the case of natural deposits a reasonable allowance for depletion of mineral and for depreciation of improvements. The provisions of the statute and these articles do not apply to or affect the regulations covering invested capital, losses, accounting methods, etc. The essence of these provisions of the statute is that the owner of mineral deposits, whether freehold or leasehold, shall within the limitations prescribed, secure through an aggregate of annual depletion and depreciation deductions the return of either (a) his capital invested in the property, or (b) the value of his property on the basic date, plus subsequent allowable capital additions (see article 222), but not including land values for purposes other than the extraction of minerals. Operating owners, lessors, and lessees, whether corporations or individuals, are entitled to deduct an allowance for depletion and depreciation, but a stockholder in a mining or oil or gas corporation is not allowed such deductions. (See further articles 839 and 844.) When used in these articles of the regulations covering depletion and depreciation (a) The term "basic date" indicates the date of valuation, i. e., March 1, 1913, in the case of property acquired prior thereto, the date of acquisition in the case of property acquired on or after March 1, 1913, or the date of discovery, or within 30 days thereafter, in the case of discovery. (b) The "fair market value" of a property is that amount which would induce a willing seller to sell and a willing buyer to purchase. Where there has been no sale and the fair market value at the basic date is to be used, such value will be determined by the method which a prospective vendor and vendee in the industry would use in arriving at the sale value of the property at the basic date. (c) A "mineral property" or "property" is the oil or gas well, including the mineral, plant, development, and surface value of the land. The value of a mineral property is the combined value of its component parts. (d) A "mineral deposit" refers to "minerals only," such as the "ores only" in the case of a mine, to the "oil only " in the case of an oil well, and to the "gas only " in the case of a gas well. The value of a mineral deposit is its cost; or it is the value of the mineral property, less the value of the plant, equipment, and surface of the land for purposes other than mineral production. (e) "Minerals" comprise ores of the metals, coal, oil, gas, and such nonmetallic substances as abrasives, asbestos, asphaltum, barytes, borax, building stone, cement rock, clay, crushed stone, feldspar, fluorspar, fuller's earth, graphite, gypsum, limestone, magnesite, marl, mica, mineral pigments, peat, potash, precious stones, refractories, rock phosphate, salt, sand and gravel, silica, slate, soapstone, soda, sulphur, and talc.) (f) "Operating profit" is the net income from mineral production before depletion and depreciation are deducted. It is distinct from net income. ART. 202. Capital recoverable through depletion deduction in the case of an operating owner.-In the case of an operating owner in fee, the capital remaining in any year recoverable through depletion and depreciation deductions is (a) the cost or value of the property at the basic date plus (b) subsequent allowable capital additions and minus (c) depletion and depreciation sustained, whether legally allowable or not, from the basic date to the taxable year, and minus (d) the value of the land at the basic date for other purposes than mineral production. The capital recoverable through depletion is the total capital remaining less the sum recoverable through depreciation. ART. 203. Capital recoverable through depletion deductions in the case of lessee.— (a) In the case of a lessee, the capital remaining in any |