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UpLogin  The Farm CPA  RSS By: Paul Neiffer, Top Producer
Depletion - The Greater of Cost or Percentage!  Aug 29, 2011  We
had a reader ask the following question:  "Hi, I just inherited
a Kansas wheat farm with an oil well on it. I assume that I
still get the 15% percentage depletion on the oil royalty. My
question is do you know if I can "value" the oil and then take a
larger cost depletion deduction from the royalty income?"  Many
farmers in the Midwest and other areas of the U.S. may have
situations similar to this reader's. Many of our clients are now
making more money from their oil and gas income than from
farming.   One method of reducing this income is the use of
depletion. Cost depletion is similar to depreciation and is
based upon the amount of units sold during the year compared to
the estimated total units still available to be sold. For
example, assume a farmer inherits a piece of farmland with an
oil well on it. A qualified survey of t