Rev. Rul. 56-599

Amounts expended for drilling a water well to be used for irrigation and other agricultural purposes by a taxpayer engaged in the business of farming constitute capital expenditures and are not deductible from gross income. See Rev. Rul. 55-367, C.B. 1955-1, 25. Any loss incurred upon the abandonment of the well for bona fide business reasons indicated by some overt act or identifiable event, such as by filling or sealing the well excavation or casing , resulting in the termination of the existence of the well and all economic benefits therefrom, is deductible by the taxpayer as a business loss within the purview of section 165 of the Internal Revenue Code of 1954 in the taxable year in which such action is actually taken. Rev. Rul. 54-581, C.B. 1954-2, 112.