Firms are allowed to deduct percentage depletion with respect to a productive asset even if the adjusted tax basis of the asset is zero.

Question

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According to the Internal Revenue Code, firms are permitted to deduct percentage depletion based on the gross income from mineral or natural resource deposits, rather than the asset's adjusted tax basis. Therefore, the fact that the adjusted tax basis of the asset is zero does not prevent a firm from claiming percentage depletion deductions.

Firms Are Allowed to Deduct Percentage Depletion with Respect to a Productive