Under the terms of a mineral lease, a lessee acquires, for a stated term, the right and obligation to obtain production of mineral. Oil and gas leases typically provide that for each year that the lessee fails to make efforts to obtain production, the lessee must pay a "delay rental" to the lessor. Under section 1.612-3(c), the payor has the option to deduct delay rental currently under section 266 or charge it to depletable capital account. This project will amend the regulations to clarify the application of section 263A to delay rentals.