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.