Cowboy Oil Company, an integrated producer, has an unproved property with acquisition and capitalized G&G costs of $35,000. Cowboy also has a proved property with the following costs:

Determine the amount of the tax loss in each of the following situations:

a. Cowboy drilled a dry hole on the unproved property costing $250,000 for IDC and $60,000 for equipment. Equipment worth $10,000 was salvaged.

b. As a result of the dry hole, Cowboy decided to abandon the unproved property.

c. Cowboy abandoned Well 1 on the proved property. Wells 2 and 3 are still producing. Assume that the wells had been depreciated separately.

d. Assume that instead of the circumstances in part

c, Cowboy abandoned the entire lease, and that equipment worth $27,000 was salvaged.

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Lease Well 1 Well 2 Well 3 Total Acquisition costs $40,000 $ 40,000 Capitalized IDC costs Equipment costs $ 50,000 $280,000 100,000 500,000 $170,000 500,000 300,000 900,000 Accumulated depletion (8,000) (8,000) Accumulated amortization (13,000) (110,000) (57,000) (180,000) Accumulated depreciation (25,000) (200,000) Net $32,000 $112,000 $470,000 (100,000) (325,000) $313,000 $927,000