Heather Purchased Undeveloped Land to Drill for Oil and Gas

question 24

Multiple Choice

Heather purchased undeveloped land to drill for oil and gas.She spent $800,000 on intangible drilling costs during the year of purchase,which she elected to immediately deduct.During the three years of the well's operation,Heather deducted $1.2 million of cost depletion.Heather has sold the property for a $3 million gain.The gain will be treated as

• A)$3 million Sec.1231 gain.
• B)$3 million ordinary gain.
• C)$2 million ordinary income and $1 million Sec.1231 gain.
• D)$1.2 million ordinary income and $1.8 million Sec.1231 gain.

---

Definitions:

Autism Spectrum Disorder

A developmental disorder characterized by challenges with social skills, repetitive behaviors, and speech and nonverbal communication, with symptoms appearing in early childhood.

Intellectual Development Disorder

A disorder characterized by significant limitations in both intellectual functioning and adaptive behavior, impacting everyday social and practical skills.

Alcoholic Parent

Refers to a parent who suffers from alcoholism, a chronic disease characterized by uncontrolled drinking and preoccupation with alcohol.