Island Creek Coal Company v. Commissioner of Internal Revenue

HAYNSWORTH, Chief Judge:

For purposes of computing the maximum limitation upon an allowance for depletion to an operator of coal mines, we hold that an expenditure is not deductible in computing “taxable income from the property” when the taxable income generated by the expenditure is not includible in “gross income from the property.”

In addition to ordinary fire insurance on its treatment plants, Island Creek Coal Company purchased business interruption insurance to indemnify it for losses in net profits resulting from lost production occasioned by fire damage to the treatment plants. Two of…