What is the amount of deduction for g-g costs incurred

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Company Z incurred $45,000 in G&G costs for work performed on 100,000 acres named Project Area 15. Three areas of interest were determined based on the initial G&G work in Project Area 15, Area 1, 2, & 3. Company Z incurred costs for additional G&G work was performed for each area as follows:

Area 1 $35,000
Area 2 $55,000
Area 3 $40,000

As a result of the G&G work performed on the three areas, the following leases were entered into:

Lease Acres      leased WI

Area 1 Lease A  10,000 75%

Lease B          20,000 25%

Area 2 Lease C 40,000 100%

Area 3 Not leased

Problem 1: What is the amount of the deduction for G&G costs incurred for Lease B in the current year?

option 1: $20,000

option 2: $30,000

option 3: $70,000

option 4: $50,000

Reference no: EM132774481

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