All of the following are characteristics of percentage depletion except:
A)Depletion is determined using a statutory percentage times gross income.
B)Percentage depletion can exceed the property's cost.
C)Depletion in excess of cost results in a negative basis for property.
D)Is an investment incentive provision.

Question

Quizplus · Accepted Answer

Percentage depletion does not result in a negative basis for the property. Instead, it allows a taxpayer to deduct a fixed percentage of the gross income from the resource extraction, potentially exceeding the cost of the property, but it does not create a negative basis in the property.

All of the Following Are Characteristics of Percentage Depletion Except