bsredlight30
Level 1
‎01-25-2021 12:24 PM

Hello - was wondering if i could get some thoughts on the following I cannot seem to find anything specific in the tax guidance:

 

Customer runs a gravel pit operation on Sch C we use the % depletion based on gross revenues.  Client cleared land to extend size of gravel pit to the tune of $30k.  As we are using % depletion the basis of pit doesn't have a bearing on depletion, can we take the $32k as an expense versus capitalizing it?  I know land clearing usually adds to the basis of say a building but in my eyes this seems like something to just expense.  I have seen some guidance but it seems to apply to farming. 

Any thoughts are appreciated.

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IRonMaN
Level 15
‎01-25-2021 01:35 PM

Based on that info, I would have to vote for capitalization of the costs.


Slava Ukraini!
Terry53029
Level 14
Level 14
‎01-25-2021 06:26 PM

I don't have a reference, but I thank the IRS call's that "stripping", and like @IRonMaN  said he votes on capitalizing that cost. I cast my vote with him

bsredlight30
Level 1
‎01-28-2021 07:57 AM

Thanks for the thoughts - i will look into stripping costs.  as we are depleting using a % of revenue i just dont see how capitalizing these costs ever get depreciated out?

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