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May 12, 2021

Tax Court holds mining company can't deduct estimated drilling costs as cost of goods sold, absent any gross receipts from the sale of goods

In BRC Operating Co. LLC, et al. v. Commissioner, T.C. Memo. 2021-59 (May 12, 2021), the Tax Court has granted partial summary judgment for the IRS, sustaining the Service's disallowance of deductions for estimated drilling costs that a mining company claimed as cost of goods sold. To recover cost of goods sold, an entity must have gross receipts from the sale of goods to offset, the court concluded.


BRC Operating et al v Commissioner