Dawkins Logging Company buys 400 acres of forest land for $50,000. The purchase price is allocated as follows: $10,000 to the land and the remaining $40,000 to the timber. At the time of purchase, there was an estimated 400,000 board feet of timber on the land. During the first year, Dawkins cuts and sells 100,000 board feet of timber off the land.

REQUIRED:

Determine the depletion deduction that Dawkins will be allowed to claim for the first year. Search a tax research database and find the relevant authority(ies) that forms the basis for your answer. Your answer should include the exact text of the authority(ies) and an explanation of the application of the authority to Dawkins’s facts. If there is any uncertainty about the validity of your answer, indicate the cause for the uncertainty.