On January 1, 20XA, Core Oil Company bought a developed lease for \($300,000.\) During 20XA, Core Oil Company incurred \($600,000\) of IDC. Reserves of 400,000 barrels were discovered, and 100,000 barrels were produced and sold. Gross income from production was \($2,000,000.\) On January 4, 20XB, the company sold the property for \($700,000.\) All reserve, production, and sales data apply only to Core Oil Company

a. Determine the amount of ordinary income and the amount of any capital gain assuming Core Oil is an integrated producer and that part of the IDC is capitalized as required. Assume that all of the IDC was incurred on April 1, 20XA.

b. Determine the amount of ordinary income and the amount of any capital gain, assuming an independent producer, percentage depletion of 15% and that all the IDC was expensed as incurred. Ignore the 100% and 65% limitations.