Deductible Water

The Texas farm where Farmer Marvin Shurbet raises wheat and cotton is part of the 22-million-acre Southern High Plains region, where 30 years ago the onslaught of irrigation began taking more water out of the ground than rains could replace. The High Plains' water table has receded ever since.

And that novel situation gave Shurbet a novel idea. Why not treat his water as a natural resource and claim a tax-depletion allowance, just as if he were producing oil? Shurbet was not selling the water the way an oilman sells oil; still, it was a necessary part of his business. He knocked $377.91 off his 1959 income tax to cover his dwindling liquid capital.

The Internal Revenue Service disallowed the deduction, and Shurbet decided to fight. After 1,700 pages of testimony, he won the first round in a Texas district court. The Government took the case to New Orleans' Fifth Circuit Court of Appeals, claiming that Shurbet had failed to show that depletion of his water meant depreciation of his land. Besides, the "natural deposits" section of the Internal Revenue Code referred to "minerals" like oil, gas, ores. Nowhere did it mention water.

The Fifth Circuit ruled for Shurbet. Congress, said the court, "intended depletion as a means of allowing an annual deduction to represent the capital exhausted in the taxpayer's business." As a consequence of the decision, the 17,250 landowners in the High Plains region, which stretches along the Canadian River from New Mexico into the Texas panhandle, should now be able to claim a depletion deduction in their next income tax report.

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