HOW DO I CALCULATE DEPLETION OF MINERAL RIGHTS

IRS Pub 535, Chapter 10, at irs.gov

HERE I GO THANKS

I'M GLAD SOMEONE KNOWS.  WE LIVE IN THE SOUTH AND SEE VERY LITTLE OF OIL ROYALTIES BUT I DO HAVE A FEW.                                                                                                         I  WENT TO THE PUB AND FOUND THE NECCESSARY INFO.                                                 HOWEVER I'M SOME WHAT UNSURE OF MY FINDINGS COULD YOU SIMPLIFY.  CAN YOU USE 15% AS DEPLETION WITHOUT HAVING TO GET THE BASIS etc.

Statutory depletion 15% of the gross income from the property.  You only need the basis in order to compute cost depletion.  You can deduct the larger of the two, but on royalties, basis is generally small enough that percentage depletion is better.

If you need to compare, cost depletion is computed as (Adjusted Basis x Current Year Units of Production) ÷ Total Reserves (which is an engineering estimate). It works more or less like declining balance depreciation, where each year, the basis is adjusted downward by the current year depletion.

ARCHIE

know anything on oklahoma state returns regarding excess depletion on oil wells have been doing it as an add back

OK allows 22% depletion, rather than 15%.  It should show as an extra deduction.  See Form 511NR, Sch B, Line 8.

that part i know--what i am asking about is the federal excess depletion number--as near as i've been able to discern you subtract the 22%  add back the other

540nr schedule a line 4

 Agreed with everything Archie said.

 Oklahoma doesn't have a net income limitation.  So if you had federal depletion carried over from a prior year, you add it back.  It's got no relationship to the 22%, which is allowed on the current year's production.

I suspect you've got an input error, because the situation you describe isn't common.

pulling the numbers from a PTP--has a breakout sheet showing income and deductions by state--fortunately oklahoma is the only one with income that needs to be filed

Phoebe's nailed it.  For US, you can have a depletion carryover due to the 65%-of taxable-income limitation.  Then, in a later year when you begin to use the federal carryover, you have to add it back to OK (because, for OK, you've already deducted it).

it just occured to me--the PTP is using cost basis depletion---thats why we have federal excess depletion----does that make any more sense

I don't do much in the way of cost depletion work, but as far as I know, cost depletion is computed the same way for OK and US.  Don't see why there would be a federal excess.  Phoebe?  Side out, your serve.

 I agree, Oklahoma has the same cost depletion allowance as Federal.  

What's the PTP say the OK activity is?

on the k1--is line 20 code y---states sustained depletion in excess of basis

has a number for 20 t--described as sustained federal depletion

20t is karger than 20y