percentage depletion net income limitation
integrated oil companies. Second, depletion may only be claimed up to specific daily American production levels of 1,000 barrels of oil or 6,000 mcf of natural gas. Third, the deduction is limited to 65% of net taxable income. Fourth, the net income limitation requires percentage depletion to be calculated on a property-by-property basis. 2 It prohibits percentage depletion to the extent it exceeds the net income from a particular