Page 455

TITLE 26-INTERNAL REVENUE CODE change of property which is neither a capital asset nor property described in section 1231". 3ubsecs. (d)(2), (e)(2), (g)(2). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (h)(1). Pub. L. 94-455, § 1901(b)(21)(C), sub- stituted "and subsection (a) of section 615 (as in effect before the enactment of the Tax Reform Act of 1976)" for "and section 615(a) and the amounts which are or have been treated as deferred expenses under section 615(b)". Subsec. (h)(3). Pub. L. 94-455, § 1901(b)(21)(D), struck out "and all amounts treated as deferred ex- penses which were paid or incurred" following "amounts deducted" in the provisions preceding subpar. (A), redesignated former subpar. (C) as (B), and in subpar. (B) as so redesignated, substituted "374(b)(1)" for "373(b)(1)". Former subpar. (B), which related to the application of par. (2)(B) where the tax- payer would be entitled under section 381(c)(10) to deduct expenses deferred under section 615(b) had the distributor or transferor corporation elected to defer such expenses, was struck out. Subsec. (I). Pub. L. 94-455, § 1901(b)(21)(E), added subsec. (I). 1969-Pub. L. 91-172, § 504(b)(1), substituted "De- duction and recapture of certain mining exploration expenditures" for "Additional exploration expendi- tures in the case of domestic mining" in the section catchline. Subsec. (a)(1). Pub. L. 91-172, § 504(b)(2), struck out reference to United States, the Outer Continental Shelf and the Outer Continental Shelf Lands Act from general rule dealing with allowance of deduc- tions for expenditures in ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral. Subsec. (h). Pub. L. 91-172, § 504(b)(3), substituted provisions imposing limitations on the operation of this section for provision making cross reference to subsecs. f) and (g) of section 615. Errvn DATE oF 1976 AMmxwrr Amendment of subsecs. (a)(2)(B), (d)(1), (h)(1), (3), (i), by section 1901(a)(89), (b)(3)(K), (21)(C), (D), (E) of Pub. L. 94455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. EnFFcTrv DATE Or 1969 AmEmzEWT Amendment by Pub. L. 91-172 applicable with re- spect to exploration expenditures paid or incurred after Dec. 31, 1969, and for purposes of this section, elections under section 615(e) of this title, effective with respect to exploration expenditures paid or in- curred before Jan. 1, 1970, to be treated as an election under subsec. (a) of this section with respect to explo- ration expenditures paid or incurred after Dec. 31, 1969, see section 504(d) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 243 of this title. En'xcTrv DATE Section 3 of Pub. L. 89-570 provided that: "The amendments made by this Act [enacting this section and amending sections 170, 301, 312, 341, 453, 615, 703, and 751 of this title] shall apply to taxable years ending after the date of the enactment of this Act ESept. 12, 1966] but only in respect of expenditures paid or incurred after such date." SacTxoN RxnmR TO IN OTHrn SECTIONS This section is referred to in sections 170, 243, 301, 312, 341, 381, 453, 703, 751 of this title, PART II-EXCLUSIONS FROM GROSS INCOME Sec. 621. Payments to encourage exploration, develop- ment, and mining for defense purposes. § 621. Payments to encourage exploration, develop- ment, and mining for defense purposes There shall not be included in gross income any amount paid to a taxpayer by the United States (or any agency or instrumentality there- of), whether by grant or loan, and whether or not repayable, for the encouragement of explo- ration, development, or mining of critical and strategic minerals or metals pursuant to or in connection with any undertaking approved by the United States (or any of its agencies or in- strumentalities) and for which an accounting is made or required to be made to an appropriate governmental agency, or any forgiveness or dis- charge of any part of such amount. Any expen- ditures (other than expenditures made after the repayment of such grant or loan) attribut- able to such grant or loan shall not be deduct- ible by the taxpayer as an expense nor increase the basis of the taxpayer's property either for determining gain or loss on sale, exchange, or other disposition or for computing depletion or depreciation, but on the repayment of any por- tion of any such grant or loan which has been expended in accordance with the terms thereof such deductions and such increase in basis shall to the extent of such repayment be allowed as if made at the time of such repayment. (Aug. 16, 1954, ch. 736, 68A Stat. 212.) PART III--SALES AND EXCHANGES Sec. 631. Gain or loss in the case of timber, coal, or do- mestic iron ore. [632. Repealed.] AMENDMExTS 1976-Pub. L. 94-455, title XIX, § 1901(b)(22)(A), Oct. 4, 1976, 90 Stat. 1798, struck out item 632 "Sale of oil or gas properties". 1964-Pub. L. 88-272, title II, § 227(b)(2), Feb. 26, 1964, 78 Stat. 98, inserted the reference to domestic iron ore in item 631. § 631. Gain or loss in the case of timber, coal, or do- mestic iron ore (a) Election to consider cutting as sale or exchange If the taxpayer so elects on his return for a taxable year, the cutting of timber (for sale or for use in the taxpayer's trade or business) during such year by the taxpayer who owns, or has a contract right to cut, such timber (provid- ing he has owned such timber or has held such contract right for a period of more than 9 months) shall be considered as a sale or ex- change of such timber cut during such year. If such election has been made, gain or loss to the taxpayer shall be recognized in an amount equal to the difference between the fair market value of such timber, and the adjusted basis for depletion of such timber in the hands of the taxpayer. Such fair market value shall be the fair market value as of the first day of the tax- able year in which such timber is cut, and shall thereafter be considered as the cost of such cut timber to the taxpayer for all purposes for Page 455 § 631