Horeford Mines, Inc. paid $15,000,000 for mineral reserves outside of a small town in Arkansas. The company estimates that about 32,000 tons of the mineral are available at that location. For the first year of operations at the location, Horeford reports the following:

Selling price per ton $800

Tons sold 5,000

Operating expenses $1,000,000

Intangible drilling costs $400,000

The company elects to capitalize the intangible drilling costs. The mineral has a statutory percentage depletion rate of 20%. For this type of mineral, percentage depletion cannot exceed 50% of the taxable income from the property before the depletion allowance.

(A) IF THE COMPANY ELECTS TO USE PERCENTAGE DEPLETION, WHAT IS THE AMOUNT OF THE PERCENTAGE DEPLETION FOR THE FIRST YEAR OF OPERATIONS?

(B) IF THE COMPANY ELECTS TO USE COST DEPLETION, WHAT IS THE AMOUNT OF COST DEPLETION FOR THE FIRST YEAR OF OPERATIONS?

(C) IF THE COMPANY ELECTS TO USE PERCENTAGE DEPLETION, WHAT IS THE AMOUNT OF THE NET TAXABLE INCOME FROM THE PROPERTY FOR THE FIRST YEAR OF OPERATIONS?