Sachin owns a platinum mine with a basis of $30,000,000 and estimated reserves of 1,500,000 grams of platinum

Accounting Aug 13, 2020

Sachin owns a platinum mine with a basis of $30,000,000 and estimated reserves of 1,500,000 grams of platinum. He extracted 90,000 grams and sold 150,000 at $20 per gram in 2020. Sachin's taxable income before the depletion deduction is $2,000,000.

What is Sachin's percentage depletion deduction in 2020?

$3,000,000

None of these

$693,000

$1,000,000

$1,155,000

Expert Solution

Percentage depletion deduction= (Basis for depletion/ reserve units)* Units sold

= (30000000/ 1500000)* 150000

= 3000000

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