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TITLE 26-INTERNAL REVENUE CODE which such cost is a necessary factor. If a tax- payer makes an election under this subsection, such election shalh apply with respect to all timber which is owned by the taxpayer or which the taxpayer has a contract right to cut and shall be binding on the taxpayer for the taxable year for which the election is made and for all subsequent years, unless the Secretary, on showing of undue hardship, permits the tax- payer to revoke his election; such revocation, however, shall preclude any further elections under this subsection except with the consent of the Secretary. For purposes of this subsec- tion and subsection (b), the term "timber" in- cludes evergreen trees which are more than 6 years old at the time severed from the roots and are sold for ornamental purposes. (b) Disposal (if timber with a retained economic in- terest In the case of the disposal of timber held for more than 9 months before such disposal, by the owner thereof under any form or type of contract by virtue of which such owner retains an economic interest in such timber, the differ- ence between the amount realized from the dis- posal of such timber and the adjusted depletion basis thereof, shall be considered as though it were a gain or loss, as the case may be, on the sale of such timber. In determining the gross income, the adjusted gross income, or the tax- able income of the lessee, the deductions al- lowable with respect to rents and royalties shall be determined without regard to the provisions of this subsection. The date of disposal of such timber shall be deemed to be the date such timber is cut, but if payment Is made to the owner under the contract before such timber is cut the owner may elect to treat the date of such payment as the date of disposal of such timber. For purposes of this subsection, the term "owner" means any person who owns an interest in such timber, including a sublessor and a holder of a contract to cut timber. (c) Disposal of coal or domestic iron ore with a re- tained economic interest In the case of the disposal of coal (including lignite), or iron ore mined in the United States, held for more than 9 months before such dis- posal, by the owner thereof under any form of contract by virtue of which such owner retains an economic interest in such coal or iron ore, the difference between the amount realized from the disposal of such coal or iron ore and the adjusted depletion basis thereof plus the deductions disallowed for the taxable year under section 272 shall be considered as though it were a gain or loss, as the case may be, on the sale of such coal or iron ore. Such owner shall not be entitled to the allowance for percentage depletion provided in section 613 with respect to such coal or iron ore. This subsection shall not apply to income realized by any owner as a co-adventurer, partner, or principal in the mining of such coal or iron ore, and the word "owner" means any person who owns an eco- nomic interest in coal or iron ore in place, in- cluding a sublessor. The date of disposal of such coal or iron ore shall be deemed to be the date such coal or iron ore is mined. In deter- mining the gross income, the adjusted gross income, or the taxable income of the lessee, the deductions allowable with respect to rents and royalties shall be determined without regard to the provisions of this subsection. 'I nis subsec- tion shall have no application, for purposes of applying subchapter G, relating to corporations used to avoid income tax on shareholders (in- cluding the determinations of the amount of the deductions under section 535(b)(6) or sec- tion 545(b)(5)). This subsection shall not apply to any disposal of iron ore- (1) to a person whose relationship to the person disposing of such iron ore would result in the disallowance of losses under section 267 or 707(b), or (2) to a person owned or controlled directly or indirectly by the same interests which own or control the person disposing of such iron ore. (Aug. 16, 1954, ch. 736, 68A Stat. 213; Feb. 26, 1964 Pub. L. 88-272, title II, § 227(a)(1), (b)(1), 78 Stat. 97, 98; Oct. 4, 1976, Pub. L. 94-455, title XIV, § 1402(b)(1)(I), (3), title XIX. § 1906(b)(13)(A), 90 Stat. 1732, 1733, 1834.) TAXABLE YEARs AFTER 1977 Subsecs. (a), (b), (c) of this section amend- ed by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective for tax- able years beginning after Dec. 31, 1977, by substituting "1 year"for "9 months". AMENDMENTS 1976--Subsec. (a). Pub. L. 94-455, §§ 1402(b)(1)(I), (3), 1906(b)(13)(A), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977 and struck out "before the beginning of such year" before" ) shall be considered as a sale" effective for taxable years beginning after Dec. 31, 1976, and "or his delegate" following "Secretary" wherever ap- pearing. Subsec. (b). Pub. L. 94455, § 1402(b)(1)(I), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. Subsec. (c). Pub. L. 94-455, § 1402(b)(1)(I), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. 1964-Pub. L. 88-272, § 227(b)(1), inserted the refer- ence to domestic iron ore in the section catchline. Subsec. (c). Pub. L. 88-272, § 227(a)(1). inserted "or domestic iron ore" in the subsection catchline, "or iron ore mined in the United States" after "coal (including lignite)", "or iron ore" after "coal" wherever appear. ing, and provided that the subsection shall not apply to any disposal of iron ore to a person whose relation- ship to the person disposing of such ore would result in the disallowance of losses under section 267 of 717(b), or to a person owned or controlled by the same interests which own or control the person disposing of such iron ore. EFFECrIVE DATE or 1976 AMENDMENT Section 1402(b)(1) of Pub. L. 94-455 provided in part that the substitution of "9 months" for "6 months" in subsecs. (a), (b), and (c) of this section by section 1401(b)(1)(I) of Pub. L. 94-455 is effective with respect to taxable years beginning in .1977. Section 1402(b)(3) of Pub. L. 94-455 provided in part that the amendment to subsec. (a) by section 1402(b)(3) of Pub. L. 94-455, striking out "before the beginning of such year", is effective with respect to taxable years beginning after Dec. 31, 1976. EFFECTIVE DATE OF 1964 AMENDMENT Amendment of section by Pub. L. 88-272 applicable with respect to amounts received or accrued in taxable years beginning after Dec. 31, 1963. attributable to Page 456