Lawrence cost depletion deduction

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Reference no: EM13992016

On July 4 of the current year, Lawrence invests $240,000 in a mineral property. He estimates that he will recover 800,000 units of the mineral from the deposit. During the current year, Lawrence recovers and sells 100,000 units of the mineral for $3.50 per unit.

a. What are Lawrence's cost depletion deduction for the current year and his adjusted basis for the mineral deposit after deducting depletion?

b. If the percentage depletion rate for the mineral is 10%, what are his depletion deduction for the current year and his adjusted basis for the mineral deposit after deducting depletion?

c. If the statutory percentage depletion rate for the mineral is 10% and Lawrence's income from the mineral before the depletion deduction is $9,200, what are his depletion deduction for the current year and his adjusted basis for the mineral deposit after deducting depletion?

Reference no: EM13992016

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