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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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how much is the depletion on royalty ...

Customer Question

how much is the depletion on royalty income?
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.


There are a number of factors involved in determining the depletion. I am giving you a link to the section of IRS Publication 535 which discusses the various factors and formulas to use.

If this has been helpful, please press the "Accept" key. Thanks!


Customer: replied 8 years ago.
Reply to Merlo's Post: I have looked at that publication and frankly I don't understand it, that is why I asked on this website.
Expert:  Ed Johnson replied 8 years ago.

Dear page,

I have been asked to take a look at your question.

I will need some information, lets start with what kind of royalties do you have? are they from gas, oil, minerals, intellectual property, etc.

Customer: replied 8 years ago.
I receive royalty income from oil and gas property
Expert:  Ed Johnson replied 8 years ago.

Dear page,

I need to know the following if you can give it to me:

1. What is the total reserve in your oil and gas well?

2. What was the actual annual production?

3. What was the gross income from the royalties?

Customer: replied 8 years ago.
Gross income $13,000
Expert:  Ed Johnson replied 8 years ago.

Dear page,

the rate is 15% of your gross, but you may not be able to use that percentage.

we need to determine the actual depletion of the reserves on which you collect royalties.

so do you know the total capacity and the actual annual production during this past year.

Fore example:

If the (lets use well) if the well has 1 million barrels total, and they pumpted 120,000 barrels last year, I need to know that.