On July 4 of the current year, Lawrence invests $234,000 in a mineral property. He estimates that he will recover 840,000 units of the mineral from the deposit. During the current year, Lawrence recovers and sells 100,800 units of the mineral for $3.60 per unit. a. Lawrence's cost depletion deduction for the current year is $ . Lawrence's basis in the mineral property after deducting depletion is $ .
b. The percentage depletion rate is 10%. Lawrence's cost depletion deduction for the current year would be $ . Lawrence's basis in the property after deducting percentage depletion is $ .
c. Using the calculations from parts a and b and knowing that Lawrence's income from the mineral before the depletion deduction is $10,890, respond to the following. Lawrence's percentage depletion deduction for the current year would be $ . To maximize his depletion deduction, he should deduct depletion based on the cost method.