Eula Owns a Mineral Property That Had a Basis of $23,000

question 44

Multiple Choice

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?

• A)$15,000
• B)$23,000
• C)$25,000
• D)$0
• E)None of these

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Definitions:

Account Balance

The total amount of money in a financial account, calculated by subtracting total debits from total credits.

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense account.

Acquisition Method

An accounting procedure for recording the purchase of one company by another, focusing on fair value assessments of acquired assets and liabilities.