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

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

a. Hard Times 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, Hard Times decided to abandon the unproved property.

c. Hard Times 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 c, Hard Times 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 Net (25,000) (200,000) (100,000) (325.000) $32,000 $112,000 $470,000 $313,000 $927,000