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Deletion Rate

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Level 1

I have a client who has sold huge amounts of water to the oil & gas industry for fracking operations.  He got the water sales on a 1099-MISC as royalties - is there a depletion rate - like oil & gas is 15%  - is there on for water??

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Level 8
Level 8

@taxiowa  may be able to help

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Level 12

@PhoebeRobertsmight be able to help.

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The statutory (percentage) depletion rate for water is zero.

https://www.law.cornell.edu/cfr/text/26/1.613-2

"(4) For purposes of this section, the term all other minerals does not include (i) soil, sod, dirt, turf, water, or mosses"

 

Water is considered an inexhaustible resource, not a depleting one.