It is agreed by both parties that the theory under which we must determine whether or 1958 U.S. Tax Ct. LEXIS 180">*188 not petitioner's rock is quartzite within the intent of Congress, is by applying the commonly understood commercial meaning of the term. This theory or test has been approved by this and other courts numerous times. See Virginian Limestone Corporation, 26 T.C. 553">26 T.C. 553; Spencer Quarries, Inc., 27 T.C. 392">27 T.C. 392; and South Jersey Sand Co., 30 T.C. 360">30 T.C. 360. See also S. Rept. No. 781, 82d Cong., 1st Sess., p. 38.

The question in 30 T.C. 360">South Jersey Sand Co., supra, was whether the product mined by the taxpayer was sand or quartzite. Sand is also given a depletion rate of 5 per cent under section 114 (b) (4) (A) (i). We pointed out in the cited case that the taxpayer was arguing "its sand is 'quartzite' within the meaning of section 114 (b) (4) (A) (iii)." But we held "these words [sand and quartzite] were used by Congress so as to be mutually exclusive, and we are therefore not faced with the choice of selecting one out of two categories, both of which are applicable to the substance in question."

Here we are faced with the problem, not present in the South Jersey Sand Co. 1958 U.S. Tax Ct. LEXIS 180">*189 case, for it must be admitted the substance "quartzite" would qualify as "stone." The two substances are not mutually exclusive. 30 T.C. 511">*515 If petitioner's product falls within the commonly understood commercial meaning of "quartzite" mentioned specifically in the statute, it would be appropriate to apply the 15 per cent rate of depletion for quartzite rather than the 5 per cent rate of depletion applicable to the more general term "stone."

Although respondent concedes that the end-use theory is not to be applied in this case, he applies a theory much like it in his definition of quartzite. Prior to the respondent's acquiescence in 27 T.C. 392">Spencer Quarries, Inc., supra, the respondent's position was that only quartzite which was sold for use as a refractory material qualified for depletion at the rate of 15 per cent under section 114 (b) (4) (A) (iii). This theory was abandoned and in Revenue Ruling 57-584, 1957-2 C. B. 898, ¹ the respondent attempts to define quartzite.

1958 U.S. Tax Ct. LEXIS 180">*190 As can be seen by a reading of the cited ruling in the footnote, it is first stated that quartzite was defined in 27 T.C. 392">Spencer Quarries, Inc., supra, as having, among other things, a "free silicon dioxide content in excess of 95 percent." Using the "definition" in 27 T.C. 392">Spencer Quarries, Inc., supra, the respondent concluded that quartzite had to have "definite chemical and physical characteristics (including capacity for use as a refractory)" which means at least 95 per cent silicon, to qualify as "quartzite." (Emphasis supplied.)

The only difference between the two positions of respondent is that in the former he would admit that a mineral was quartzite but deny the 15 per cent depletion allowed under section 114 (b) (4) (A) (iii) on the ground that the end-use of part of the mineral quarried was not to be used as refractory materials. Under the latter position respondent merely denies that the mineral is quartzite unless it is of sufficient purity so that it could be used as a refractory material.

There really is no definition of quartzite in 27 T.C. 392">Spencer Quarries, Inc., supra. There respondent1958 U.S. Tax Ct. LEXIS 180">*191 admitted the mineral mined was quartzite and the quoted portion of this case, taken by the respondent as a 30 T.C. 511">*516 definition, is found in the Findings of Fact in Spencer and obviously was not intended to be a definition of quartzite but a statement of the characteristics of the mineral in that case. Since the quest is for the commonly understood commercial meaning of the term "quartzite" it is of interest to point out that the same findings of fact in Spencer pointed out that taxpayer's sales for refractory purposes did not form a large part of taxpayer's business; the majority of its sales being to the construction industry for use as crushed stone, crushed rock, riprap, the construction of highways, earth dams, and as concrete aggregate.

The Spencer case, supra, is not authority for the proposition that the term "quartzite" is limited to mineral of sufficient purity so that it could be used as a refractory material. No such limitation on the term quartzite is found in the Code or in the legislative history of the statute. Section 114 (b) (4) (A) (iii) provides for percentage depletion at the rate of 15 per centum in the case of many mineral deposits including1958 U.S. Tax Ct. LEXIS 180">*192 "refractory and fire clay, quartzite, * * * metallurgical grade limestone, chemical grade limestone." As can be seen, the Congress saw fit to specify certain grades of some minerals according to their purity or according to the use to which they were to be put. It is noted that the Congress did employ the word "refractory" to limit clay, which is found just in front of quartzite in the statute. Certainly, had Congress intended to limit quartzite to that mineral of such purity that it could be used as a refractory material, it would have listed the mineral as "refractory quartzite." See United States Gypsum Company v. United States, 253 F.2d 738">253 F.2d 738 (C. A. 7). Since Congress did not see fit to place any restrictions on the term "quartzite," it is necessary for us to determine only whether or not petitioner's deposits are quartzite within the commonly understood commercial meaning of the term.

In making this determination, it is necessary to discuss the commercial uses of the deposits. A very small percentage of quartzite quarried is used for refractory material. The needs of the construction industry for quartzite in the form of riprap, railroad1958 U.S. Tax Ct. LEXIS 180">*193 ballast, concrete aggregate, etc., far exceed the general needs for refractory materials. 27 T.C. 392">Spencer Quarries, Inc., supra.Consequently, the construction industry uses much more quartzite than the refractory industry. As we have found, petitioner's only sales were to the construction industry.

Because the commercial meaning of the term quartzite varies with the industry, it is difficult to arrive at a commonly understood commercial meaning of the term. Some users require very high standards and others require lower standards. As we have said, our only concern with standards is whether or not the product is quartzite. It 30 T.C. 511">*517 is agreed that the refractory industry requires very high standards of purity in its quartzite while the construction industry requires lower standards because of the uses to which the material is put.

Petitioner's product does not measure up to the requirements of the refractory trade but adequately fills the needs of the construction industry. Petitioner's corporate name, The Quartzite Stone Company, used for more than 20 years before the taxable years involved, is some indication that its product was represented as quartzite1958 U.S. Tax Ct. LEXIS 180">*194 and 20 years of sales indicates some acceptance by the commercial world of that product as quartzite. The construction industry dealing with petitioner considered petitioner's product to be quartzite. Petitioner advertised the product as quartzite and orders were placed and filled by petitioner specifically requiring quartzite of certain specifications. The State Geological Survey Bulletin of Kansas also referred to petitioner's deposits as quartzite. Certainly in the construction industry, petitioner's product was quartzite within the commercial meaning of the term.

There is some dispute among geologists as to petitioner's mineral deposits. It is admitted by petitioner that its deposits do not come up to the requirements of the "classic" definition of quartzite. All of the expert witnesses testified that according to the "classic" definition, quartzite is a metamorphic, silica-cemented sandstone which, when fractured, because of the hardness of the cementing material, will break through the grains as easily as through the cement. As we have stated, petitioner's deposits are sedimentary, calcite-cemented sandstone, which, when fractured, for the most part, breaks through the1958 U.S. Tax Ct. LEXIS 180">*195 grain as well as through the cementing material. Petitioner's witness, who tested the deposits, testified that while the fractured sample sometimes broke around the grain, the cementing material was of sufficient hardness that, of the grains counted, 62 per cent were fractured.

According to one of petitioner's witnesses, Ada Swineford, an eminently qualified geologist and sedimentary petrographer for the State Geological Survey of Kansas, petitioner's deposits qualify as quartzite. She ran laboratory tests on the deposits and determined that even though the deposits are sedimentary and were cemented by calcite, the deposits are quartzite. She did admit that the theory under which she determined the deposits were quartzite was relatively new among sedimentary petrographers but was recognized by some of the leading men in the field, even though the deposits were not quartzite according to the "classic" definition of the term.

Our concern is not with the classic definition or scientific theories concerning the term quartzite but deals with the commonly understood commercially acceptable meaning of the term. We hold, under all of 30 T.C. 511">*518 the evidence presented, that petitioner's1958 U.S. Tax Ct. LEXIS 180">*196 deposits are quartzite within such meaning and, therefore, within the meaning of section 114 (b) (4) (A) (iii).

The second issue deals with certain deductions taken by the petitioner in 1951 and 1952 as rental payments for certain machinery under section 23 (a) (1) (A). The respondent determined that such payments were not in fact rental payments but partial payments on the purchase price of the machinery and disallowed the deductions.

Petitioner, in December of 1951, entered into a machinery lease agreement with Salina for the acquisition of a used tractor with dozer. The agreement provided for total "rental" of $ 10,750 to be paid at the rate of $ 895 per month, each payment to include interest at 6 per cent of the unpaid balance of the "lease." After providing that the petitioner would pay for all necessary repairs, taxes, and insurance, the petitioner was given an option to purchase the equipment at the expiration of the agreement upon paying Salina the sum of $ 1 together with any amount the lessee owed Salina for parts and supplies. A second option was provided for whereby the petitioner could purchase one or more new crawler tractors and dozers from Salina and apply 20 per1958 U.S. Tax Ct. LEXIS 180">*197 cent of the "rental" moneys already paid to Salina by returning the used tractor with dozer. In June of 1952, or some 6 months after entering the agreement, petitioner decided to exercise the purchase option and keep the used tractor by paying the balance of the monthly payments due on the tractor and also the $ 1 option price.

It is well settled that regardless of the form or nomenclature of the transaction, so-called "rental payments" must be treated as partial payments of the purchase price of property, if by virtue of the payments the taxpayer has acquired, or will acquire, title to or an equity in, the property. Chicago Stoker Corporation, 14 T.C. 441">14 T.C. 441; D. M. Haggard, 24 T.C. 1124">24 T.C. 1124, affd. 241 F.2d 288">241 F.2d 288; and Ersel H. Beus, 28 T.C. 1133">28 T.C. 1133. In fact, section 23 (a) (1) (A) of the Code itself restricts "rental" payments in much the same language in that it allows as deductions all of the "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including * * * rentals or other payments required to be made as 1958 U.S. Tax Ct. LEXIS 180">*198 a condition to the continued use or possession, * * * of property to which the taxpayer has not taken or is not taking title or in which he has no equity."

It is obvious to us that petitioner was acquiring, through the payment of $ 895 per month, something more than the mere use of the equipment in question. An almost conclusive indication of this is the fact that a year after petitioner agreed to pay $ 10,750 for a year's "rental" it was to be permitted to "purchase" the tractor for the extremely nominal sum of $ 1. The "rental" charge is so disproportionate to the "purchase" price that we think it is unnecessary to discuss 30 T.C. 511">*519 the issue further. See 24 T.C. 1124">D. M. Haggard, supra, and Truman Bowen, 12 T.C. 446">12 T.C. 446. In the light of the foregoing, and after considering the entire record, we are convinced that the petitioner was acquiring a substantial equity through the payments designated as rent. Accordingly, we hold that such payments are not deductible under section 23 (a) (1) (A).

Decision will be entered under Rule 50.