TifCo Petroleum has the following information about its operations:
• Leasehold costs $6,000
• Accumulated depletion $1,900
• L&WE $400,000
• Accumulated depreciation $95,000
• The lease is subleased to JohnCo Oil Company for $250,000 and TifCo retains a
1/16 ORI. The FMV of the equipment is $150,000.
Required: Determine the tax basis of TifCo's assets, any amount of taxable income, any
tax deductions.