Chris purchased an oil interest for $2 million. Recoverable barrels were estimated to be 500,000. During the

Question:

Chris purchased an oil interest for $2 million. Recoverable barrels were estimated to be 500,000. During the year, 120,000 barrels were sold for $3.84 million, other business expenses (including cost recovery) were $1.24 million, and IDCs were $1 million. Calculate Chris's taxable income under the expensing and capitalization methods of accounting for IDCs?