CengageNOWv2, 1 term Printed Access Card for Hoffman/Young/Raabe/Maloney/Nellen's South-Western Federal Taxation 2018: Individual Income Taxes, 41st
41st Edition
ISBN: 9781337389518
Author: William H. Hoffman, James C. Young, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
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Question
Chapter 8, Problem 56P
To determine
Determine W’s taxable income after depletion deductions.
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Mr. Gates bought an interest in zine ore assets for S45,000. It was estimated that the recoverable amount of zine ore
was 22,000 Ibs. In the first year of operation, Mr. Gates received gross income of $18,000 from the sale of 1,200
Ibs. of zinc ore recovered in the first year. He incurred expense of $1.500 to recover the ore.
% depletion allowance applicable to zinc ore is 22% of gross income. Also, the % depletion allowance cannot
exceed 50% of taxable income computed without the depletion deduction.
Compute Mr. Gates' depletion allowance for the year.
(Hint: Cost of Depletion in the first year is the original cost prorated by the percentage of the ore recovered in the
first year to the total recoverable ore amount. Taxable income is gross income less expenses. Then choose
between i) the cost of depletion and i) the permissible % depletion allowance.)
A company purchased a drill press costing $230,000 in year 0. The drill press, classified as seven-year recovery property, has been depreciated by the MACRS method. If it is sold at the end of three years for (1) $150,000 or (2) $100,000, compute the gains (losses) for each situation. Assume that both capital gains and ordinary income are taxed at 34%.
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Wes acquired a mineral interest during the year for $10,000,000. A geological survey estimated that 250,000 tons of the mineral remained
in the deposit. During the year, 80,000 tons were mined and 45,000 tons were sold for $12,000,000. Other related expenses amounted to
Problem 8-52 (LO. 8)
$5,000,000. Assume the mineral depletion rate is 22%.
a. What is the taxable income before the deduction for depletion?
A000'000L
b. Under cost depletion, what is the amount of the deduction?
C. Under percentage depletion, what is the amount of the deduction?
9
A000'0
d. Wes's lowest taxable income after the depletion deduction is S
Natural resources (e.g., oil, gas, coal, gravel, and timber) are subject to depletion, which is simply a form of depreciation applicable to natural
resources, The owner of an interest in the natural resource is entitled to deduct depletion. Like depreciation, depletion is a deduction for
adjusted gross income.
Chapter 8 Solutions
CengageNOWv2, 1 term Printed Access Card for Hoffman/Young/Raabe/Maloney/Nellen's South-Western Federal Taxation 2018: Individual Income Taxes, 41st
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - LO.2 Robert purchased and placed in service...Ch. 8 - LO.2 Jim owns a very large ranch. A large part of...Ch. 8 - Prob. 10DQ
Ch. 8 - Prob. 12DQCh. 8 - Discuss the definition of business income as it is...Ch. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 21CECh. 8 - Prob. 22CECh. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Prob. 25CECh. 8 - Prob. 26CECh. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Prob. 29CECh. 8 - Prob. 30CECh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Prob. 39PCh. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 42PCh. 8 - Prob. 43PCh. 8 - Prob. 44PCh. 8 - Prob. 45PCh. 8 - Prob. 46PCh. 8 - Prob. 47PCh. 8 - Prob. 48PCh. 8 - Prob. 49PCh. 8 - Prob. 50PCh. 8 - Prob. 51PCh. 8 - LO.2, 5, 9 Jamie purchased 100,000 of new office...Ch. 8 - Prob. 53PCh. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Prob. 56PCh. 8 - Prob. 57CPCh. 8 - Prob. 58CPCh. 8 - Prob. 1RPCh. 8 - Prob. 2RPCh. 8 - Prob. 3RPCh. 8 - Michael Sima, a sole proprietor craftsman,...Ch. 8 - Cox Construction, a company in its 10th year of...Ch. 8 - Stem Corp. bought a machine in February of year 7...Ch. 8 - Prob. 4CPACh. 8 - Data, Inc., purchased and placed in service a...Ch. 8 - Data, Inc., purchased and placed in service 5,000...Ch. 8 - Which statement below is correct? a. Real property...
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