Are depletion tax allowances just for production income or can it apply to leases, bonuses etc.?
Del, I believe that the depletion allowance applies only to production. I tried hard to get my accountant to believe that the depletion allowance applied to bonus ( at one time it did) but he said no way. Let me know if you find anything different.
I have had the same problem. The IRS held that bonus was in the nature of pre-paid royalties, but now is not subject to the depletion allowance. Ordinary Income, amigo.
David B. McCall said:
Del, I believe that the depletion allowance applies only to production. I tried hard to get my accountant to believe that the depletion allowance applied to bonus ( at one time it did) but he said no way. Let me know if you find anything different.