Depletion
Depletion is an income tax deduction usually claimed on Schedule E that recognizes that a mineral is consumed as it is mined. Depletion reduces the cost basis of the asset essentially converting part of the income from ordinary income tax rates to capital gains.
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Expanded Definition
Royalty trusts often are publically traded limited partnerships which provide a tax package detailing how to file income taxes. Depletion is usually one of the deductions that reduces taxes paid on their unit payments.
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