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Depletion Accounting

  • 03/09/2012 2:05 PM
    Message # 852915
    What is the rate of depletion used in the state of Texas 27.5%?  Is there an official rule on the matter?
  • 03/15/2012 8:42 AM
    Reply # 859673 on 852915
    Depletion can be defined a couple of different ways.  The 27.50% you refer to is Texas State Statute for the Trust Principal and Income Act.  This is the portion of each royalty check assignable to the principal of a trust offsetting the decline in value of a depleting asset.  Secondly, the IRS Tax Code also has a tax deduction called depletion tha can be in the form of percentage depletion. at 15% or cost depletion.  When filing your 1040 this number will be illustrated on Schedule E.  The concept is again due to a depleting asset.
  • 06/16/2012 3:44 PM
    Reply # 974320 on 852915

    What is the difference in cost depletion and the standard 15 percent depletion? 

  • 06/19/2012 9:54 AM
    Reply # 976682 on 852915
    We will need one of our tax experts to define cost vs per centage depletion.  Based upon my limited knowledgeI know a calculation is required to determine the cost depletion deduction.  I would guess the majority of mineral owners use per centage depletion.
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