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TITLE 26-INTERNAL REVENUE CODE iron ore mined in such years, see section 227(c) of Pub. L. 88-272, set out as an Effective Date of 1964 Amend- ment note under section 272 of this title. CRoss RPERwczs Disposal of coal or domestic iron ore, see section 272 of this title. Gain or loss under this section excluded from net earnings from self-employment, see section 1402 of this title. Property used in trade or business as including timber, coal or domestic iron ore under this section, see section 1231 of this title. Tax on foreign corporations not engaged in business in United States, applicability of subsections (b) and (c) of this section, see section 881 of this title. Tax on nonresident alien individuals, applicability of subsections (b) and (c) of this section to, see section 871 of this title. Unrelated business taxable income, inapplicability of this section to, see section 512 of this title. Withholding tax on nonresident aliens, applicability of subsections (b) and (c) of this section to, see section 1441 of this title. SECTON REFERRED TO IN OTHER SECTIONS This section is referred to in sections 57, 272, 512, 617, 871, 881, 882, 1231, 1402, 1441 of this title; title 42 section 411. [§ 632. Repealed. Pub. L. 94-455, title XIX, § 1901(a)(90), Oct. 4, 1976, 90 Stat. 1779] Section, acts Aug, 16, 1954, ch. 736, 68A Stat. 214; Dec. 30, 1969, Pub. L. 91-172, title VIII, § 803(d)(4), 83 Stat. 684. related to tax in case of sale of oil and gas properties. EFFECTIvE DATE OF REPEAL Repeal of section effective for taxable years begin- ning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amend- ment note under section 2 of this title. PART IV-MINERAL PRODUCTION PAYMENTS Sec. 636. Income tax treatment of mineral production pay- ments. AMENDMENTS 1969-Pub. L. 91-172, title V, § 503(a), Dec. 30, 1969, 83 Stat. 630, added Part heading and section analysis. 636. Income tax treatment of mineral production payments (a) Carved-out production payments A production payment carved out of mineral property shall be treated, for purposes of this subtitle, as if it were a mortgage loan on the property, and shall not qualify as an economic interest in the mineral property. In the case of a production payment carved out for explora- tion or development of a mineral property, the preceding sentence shall apply only if and to the extent gross income from the property (for purposes of section 613) would be realized, in the absence of the application of such sentence, by the person creating the production payment. (b) Retained production payment on sale of mineral property A production payment retained on the sale of a mineral property shall be treated, for pur- poses of this subtitle, as if it were a purchase money mortgage loan and shall not qualify as an economic interest in the mineral property. (c) Retained production payment on lease of mineral property A production payment retained in a mineral property by the lesor in a leasing transaction shall be treated, for purposes of this subtitle, insofar as the lessee (or his successors in inter- est) is concerned, as if it were a bonus granted by the lessee to the lessor payable in install- ments. The treatment of the production pay- ment in the hands of the lessor shall be deter- mined without regard to the provisions of this subsection. (d) Definition As used in this section, the term "mineral property" has the meaning assigned to the term "property" in section 614(a). (e) Regulations The Secretary shall prescribe such regula- tions as may be necessary to carry out the pur- poses of this section. (Added Pub. L. 91-172, title V, § 503(a), Dec. 30, 1969, 83 Stat. 630, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTs 1976-Subsec. (e). Pub. L. 94-455 struck out "or his delegate" following "Secretary". EFFECTIVE DATE Section 503(c) of Pub. L. 91-172 provided that: "(1) General rule.-The amendments made by this section [adding this section] shall apply with respect to mineral production payments created on or after August 7, 1969, other than mineral production pay- ments created before January 1, 1971, pursuant to a binding contract entered into before August 7, 1969. "(2) Election.-At the election of the taxpayer (made at such time and in such manner as the Secretary of the Treasury or his delegate prescribes by regula- tions), the amendments made by this section shall apply with respect to all mineral production payments which the taxpayer carved out of mineral properties after the beginning of his last taxable year ending before August 7, 1969. No interest shall be allowed on any refund or credit of any overpayment resulting from such election for any taxable year ending before August 7, 1969. "(3) Special rule.-With respect to a taxpayer who does not elect the treatment provided in paragraph (2) and who carves out one or more mineral production payments on or after August 7, 1969, during the tax- able year which includes such date, the amendments made by this section shall apply to such production payments only to the extent the aggregate amount of such production payments exceeds the lesser of- "(A) the excess of "(i) the aggregate amount of production pay- ments carved out and sold by the taxpayer during the 12-month period immediately preceding his taxable year which includes August 7, 1969, over "(ii) the aggregate amount of production pay- ments carved out before August 7, 1969, by the taxpayer during his taxable year which includes such date, or "((B) the amount necessary to increase the amount of the taxpayer's gross income, within the meaning of chapter 1 of subtitle A of the Internal Revenue Code of 1954 [this title], for the taxable year which includes August 7, 1969, to an amount equal to the amount of deductions (other than any deduction under section 172 of such Code [section 172 of this titleJ) allowable for such year under such chapter. Page 457 § 636