Troy has owned an oil and gas property for a number of years. The following information is provided about the property's operations in the current year: (Click the icon to view the information.) (Click the icon to view the depletion rates.) Read the requirements. Requirement a. What is the percentage depletion amount if the IDCs are expensed? If the IDCs are expensed, the percentage depletion amount is $ Requirement b. What is the percentage depletion amount if the IDCs are capitalized? If the IDCs are capitalized, the percentage depletion amount is $ Requirement c. What is the depletion deduction amount assuming that the IDCs are expensed? If the IDCs are expensed, the depletion deduction will be $ Requirement d. Based on the information above, which method should be used for the IDCs? Explain. The method should be used because the taxpayer Gross income $ 900,000 (160,000) Minus: Expenses (including IDCs of $50,000) $ 740,000 Taxable income (before depletion) Cost depletion (if IDCs are expensed) Cost depletion (if IDCs are capitalized) $ 35,000 $ 45,000 Mineral Depletion Rate 15% 10% Oil and gas Coal, asbestos Gold, silver, copper, iron ore Sulphur and uranium Gravel, stone 15% 22% 5% All other minerals 14% Troy has owned an oil and gas property for a number of years. The following information is provided about the property's operations in the current year: (Click the icon to view the information.) (Click the icon to view the depletion rates.) Read the requirements. Requirement a. What is the percentage depletion amount if the IDCs are expensed? If the IDCs are expensed, the percentage depletion amount is $ Requirement b. What is the percentage depletion amount if the IDCs are capitalized? If the IDCs are capitalized, the percentage depletion amount is $ Requirement c. What is the depletion deduction amount assuming that the IDCs are expensed? If the IDCs are expensed, the depletion deduction will be $ Requirement d. Based on the information above, which method should be used for the IDCs? Explain. The method should be used because the taxpayer Gross income $ 900,000 (160,000) Minus: Expenses (including IDCs of $50,000) $ 740,000 Taxable income (before depletion) Cost depletion (if IDCs are expensed) Cost depletion (if IDCs are capitalized) $ 35,000 $ 45,000 Mineral Depletion Rate 15% 10% Oil and gas Coal, asbestos Gold, silver, copper, iron ore Sulphur and uranium Gravel, stone 15% 22% 5% All other minerals 14%