Wes acquired a mineral interest during year for $10,000,000. A geological survey evaluated 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 expenses amounted to $5,000,000. Consider the mineral depletion rate is 22%.
a. Evaluate the taxable income before deduction for depletion? $
b. Under cost depletion, find the amount of the deduction? $
c. Under percentage depletion, find the amount of the deduction? $
d. Wes's lowest taxable income after depletion deduction is $ .
2) Orange Corporation acquired new office furniture on 15th August, 2012, for $130,000. Orange did not elect immediate expensing under $179. Orange takes extra first-year depreciation.
a. Orange's cost recovery deduction for 2012 is $
3) Weston acquires a new office machine (7-year class asset) on 2nd November, 2012, for $75,000. This is only asset acquired by Weston during the year. He does not elect immediate expensing under $179. He does take additional first-year depreciation. On 15th September, 2013, Weston sells the machine.
a. Evaluate what MACRS convention applies to machine?
b. Find weston's cost recovery for 2012 is $ and for 2013 is $ .