Reference no: EM132165546

Question - When a major highway was to be constructed nearby, a farmer realized that a dry streambed running through his property might be a valuable source of sand and gravel. He shipped samples to a testing laboratory and learned that the material met the requirements for certain low-grade fill material. The farmer contacted the highway construction contractor, who offered 65c per cubic meter for 45,000 cubic meters of sand and gravel. The contractor would build a haul road and would use his own equipment. All activity would take place during a single summer. The farmer hired an engineering student for $2500 to count the truckloads of material hauled away. The farmer estimated that 2 acres of streambed had been stripped of the sand and gravel. The 640- acre farm had cost him $300 per acre, and the farmer felt the property had not changed in value. He knew that there had been no use for the sand and gravel prior to the construction of the highway, and he could foresee no future use for any of the remaining 50,000 cubic meters of sand and gravel. Determine the farmer's depletion allowance.