Example
Taxpayer purchases a mine for $10,000 and estimates that there are 100,000 tons of ore to be extracted. During the first year he mines 7,500 tons and sells 7,000 tons. Depletion for the first year would be computed as follows:
Rate of depletion per ton = $10,000 ÷ 100,000 = 0.10 cent
Depletion for year (0.10 cent × 7,000) = $700
The next year taxpayer sells 6,000 tons. However, a revised estimate at the end of the year indicates that there are 180,000 tons unextracted. Depletion for the second year would be computed as follows:
| Revised estimate of unextracted tonnage | 180,000 |
| Tons mined during the year | 6,000 |
| Total tonnage to be used on computing new rate | 186,000 |
| Original cost | $10,000 |
| First year's depletion | $700 |
| Remaining cost | $9,300 |
| New rate of depletion per ton = $9,300 ÷ 186,000 = | 0.5 cent |
| Depletion for year (0.5 cent × 6,000) = | $300 |