The opinion of the court was delivered by: GRIM
This case is now before the court for resolution of the issues raised in the respective motions for judgments filed by the taxpayer and the government. The parties are having difficulty in determining the exact amount of the tax payable under the court's initial opinion in this case. See 237 F.Supp. 838.
Taxpayer is an integrated miner-manufacturer of portland cement. The basic problem in this case has been to ascertain what operations and processes in taxpayer's business are to be considered mining, as opposed to manufacturing, for percentage depletion purposes and, secondly, to determine the proper method for excluding from taxpayer's gross income its manufacturing costs and profits. Taxpayer and the government have asked for amplification and clarification respecting the court's view of certain of the issues in this case.
Treatment to be Accorded Taxpayer's Packaging Operations
Treatment to be Accorded Use of Additives purchased by Plaintiff for mixing with its Quarried Cement Rock
In the process of producing portland cement from taxpayer's quarried cement rock, it is necessary to add certain limestone, iron ore and sand to the cement rock. These additives are blended and mixed with the cement rock and the component materials are pulverized and ground to a fine particle size. In the initial opinion in this case, the court referred to these processes generically as 'blending' and held that the costs attributable to such 'blending' must be considered mining costs.
The response to the request of the parties for a more specific finding on this point, I now find and enter as a conclusion of law in this case that the costs (and proportionate profits attributable thereto) of blending, mixing, crushing, grinding that pulverizing of limestone, iron ore and sand with the quarried cement rock prior to the kiln feed point, are to be considered as mining costs and profits.
Treatment to be Accorded Plaintiff's resale of purchased Mortar Cement
The hopefully final difficulty encountered by the parties in recomputing plaintiff's tax in accordance with the court's decision in this case revolves around the tax treatment to be accorded the income received by plaintiff from the sale to its customers of mortar cement not mined or manufactured by plaintiff, but purchased by it from other producers. The government in its computation has treated this operation just as if it were another post-kiln process involved in the mining-manufacturing of Portland cement, despite the fact that this court found that plaintiff's income from the purchase and resale of mortar cement can and must be isolated from its income from the mining and manufacturing of portland cement.
The cost to plaintiff of purchasing this mortar cement as well as the income produced by its resale are known. I adhere to my earlier conclusion that no proportion of the cost and profit resulting from plaintiff's portland cement business should be attributable to plaintiff's purchase and resale of mortar cement.
The findings of fact and conclusions of law expressed in the initial opinion of this court, 237 F.Supp. 838, and the subsequent opinion and order denying plaintiff's motion for reargument and reconsideration are reaffirmed. The statements contained in this opinion shall ...