Depletion has a huge impact on how much tax a company needs to pay each year, and can affect the tax burden created by the sale or purchase of a property that has already undergone some level of depletion. $30,000 retirement plan contributions, less. Unfortunately, this is not the case. hb``g`1 (d$Sz What is the difference between cost depletion and percentage depletion? $7,112 for the share of 1/2 of the SE tax deduction ($23,730 of total SE tax times 60% times 50%). I've seen some funds-of-funds with 5 or 10 lines of variously-named depletion, plus the adjustment for percentage depletion in excess of basis. A taxpayer's total percentage depletion deduction for the year from all oil and gas properties cannot exceed 65% of taxable income, computed without deducting percentage depletion, the domestic production activities deduction, NOL carrybacks, and capital loss carrybacks (if a corporation). 0000022287 00000 n Pro websites (by your friends at TaxProTalk). Tax year 2020 will see a change in the reporting of partners' basis in partnerships. 0000008980 00000 n The software, ProSystem Fx, is defaulting to including them in the current year income line on Sch L of the K-1. 0000006267 00000 n Technical topics regarding tax preparation. A, title VII, 722(e)(1), Pub. Subsec. I think I have to exclude it from the capital account, but I dont know if thats correct. The transferee partner gets an outside tax basis in the partnership equal to the purchase . Partnership distributions of property can create disparities between a partner's outside basis and the partnership's inside basis when the distributee partner (1) recognizes gain or loss or (2) takes a basis in the distributed property that is different from the partnership's inside basis. income; excess depletion; decrease. A, title VII, 722(e)(3)(A), July 18, 1984, 98 Stat. The Internal Revenue Code (IRC) Sections 611 and 613 provide two different methods one can use allocate depletion: cost depletion or percentage depletion. His taxable income from all sources is $432,000, and 65 . Sec. The distributive share of losses and deductions, depletion items (up to the property basis). 0000077143 00000 n For general partners and LLC member-managers, the tax application uses the amount you entered in the K1-4 screen in the Net earnings (loss) from self-employment field and reduces it by auto expenses, home office expenses, depreciation and section 179 expense, depletion, unreimbursed partnership expenses (entered in the K1-6 screen . The Internal Revenue Service (IRS) recently issued Notice 2019-66, which provided a rule update.Previously, a partnership was permitted to use any reasonable method to report partners' basis, but the new rules require that partnerships use the tax basis for reporting. (a)(3). 0000005583 00000 n Comparatively, the application of this carried forward deduction in a future tax year does not reduce the partner's basis at the time of deduction. 0000021758 00000 n The allowable statutory percentage depletion deduction is the lesser of net income or 15% of gross income. Percentage depletion functions as a percent of gross revenue regardless of the unit production from a piece of property during that year. plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization expense, plus restructuring charges, plus . Percentage depletion not limited by basis. Do Men Still Wear Button Holes At Weddings? %PDF-1.6 % It is mandatory to procure user consent prior to running these cookies on your website. P0A^]PJ!s1PX;Bp ^uxS[*N@{-)6a_BU?=Mn[oLxq;^Oooo}suwr~wd~{1"vgwn/n i|kug[_gy{=f)~~|/! Ng.= KD I figure out what the answer should be and judiciously override, making a note in my file as to what the carryforwards should be. The order for decreasing basis is specific because you cannot decrease your basis below zero. Rusty computes his percentage depletion deduction by multiplying his $50,000 gross income from the oil/gas property by 15%, which is $7,500. The draft instructions, released on Oct. 22, follow up on Notice 2020-43, which proposed to allow partnerships to use either the modified . 0000135450 00000 n Congress created the concept of value depletion that ultimately took the form of percentage depletion. 0000219232 00000 n 0000024496 00000 n Cost depletion limited by basis. If those terms are unfamiliar, you can find the amounts on your Schedule K-1 at lines 1, 2 to 10, 16a and 16b, and 15c respectively. The percentages range from 5 to 22 percent based on the types of resources being extracted. Press J to jump to the feed. 0000077441 00000 n Adjusted EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization expense, plus restructuring charges, plus acquisition . This means that companies will not be negatively affected by taking percentage depletion over cost depletion due to AMT. 0000065026 00000 n taxable income of the partnership as determined under section 703(a), income of the partnership exempt from tax under this title, and. http://www.irs.gov/pub/irs-wd/1210003.pdf, http://definitions.uslegal.com/i/independent-producer-oil-and-gas/, http://www.irs.gov/irm/part4/irm_04-041-001-cont02.html. So Im trying figure out the partner capital accounts on the K-1. The depletion charge is then created based on actual units of usage. The amount disallowed was being pro-rated with the other related expenses. I've never seen a partnership report a date placed in service for IDC, in part because the whole point of an O&G partnership is to be able to write off all of your IDCs. Thanks for the input and the links. Like depreciation and amortization, depletion is a non-cash expense that lowers the cost value of an asset incrementally through scheduled charges to income. <]/Prev 223780/XRefStm 3627>> 0000074946 00000 n Yes, if you take all your IDCs at once, and you have sufficient excess IDCs, you do have an AMT adjustment. HW[o~GHdQ%$H9(YKvEIj}8d%7oF;kJWW-^n`!xE10rb@b?f@2A*^!slyt>.GxXg"x{Z}ve#]h" 0000075297 00000 n LESSON 6.2 DEDUCTION FROM GROSS INCOME GROSS INCOME LESS: EXCLUSIONS LESS: DEDUCTIONS = TAXABLE INCOME Deductions or allowable deductions are business expenses and losses incurred which the law allows to reduce gross business income to arrive at net income subject to tax. not an integrated oil company) and royalty owners may use percentage depletion, subject to limitations. These percentages dictate the amount of expense allocated to a sale. 0000211769 00000 n I take my best guess and make whatever Lacerte entries give me the desired result. 0000132303 00000 n Depletion functions much like depreciating a building or equipment to reflect the fact that its value decreases over time. This tax benefit has made percentage depletion a target for tax-happy U.S. legislators since it was originally established in 1939. 0000033147 00000 n Congress enacted the percentage depletion method to incentivize taxpayers to invest in the development of natural resources. . Now let's look at the law. Before the percentage depletion deduction was created, only a deduction called cost depletion was allowed for mineral resources. The reduction is determined on a property-by property basis and is limited to the taxpayer's first 1,000 barrels of oil (or 6,000 mcf of natural . Cost basis begins as the original cost of acquiring an asset. All the royalties, less production taxes and property taxes are paid out to the partners through distributions. The Tax Adviser and Tax Section. Client is limited partner in oil and gas partnership. When you say Lacerte changed your K-1 input, you mean on the Federal K-1 Reconciliation worksheet, the topmost left-hand cell doesn't match your Screen 20.1 input? Further, the allowance to extend beyond pre-covid carryforward limitations . 8d.,B \o2p1U0sZt3~`|b.l}49 2) At-risk limitations. Where the two differ is that unlike depreciation, which allots an expense associated with a physical asset such as equipment, depletion allots an expense associated with the extraction of natural resources. 0000007899 00000 n Atomized Theory, Inc.All rights reserved. 0000009955 00000 n If we go back to our $500 illustration, if the $100 earned by the corporation were tax-exempt state and local bond interest, and if the shareholder failed to increase his basis from $500 to $600 . endstream endobj 20 0 obj <>/Metadata 4 0 R/Outlines 1 0 R/Pages 3 0 R/StructTreeRoot 6 0 R/Type/Catalog/ViewerPreferences<>>> endobj 21 0 obj >/PageWidthList<0 451.678>>>>>>/Resources<>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC/ImageI]/Properties<>/XObject<>>>/Rotate 0/StructParents 0/TrimBox[0.0 0.0 451.678 3816.0]/Type/Page>> endobj 22 0 obj [23 0 R 24 0 R 25 0 R 26 0 R 27 0 R 28 0 R 29 0 R 30 0 R 31 0 R 32 0 R 33 0 R 34 0 R 35 0 R 36 0 R 37 0 R 38 0 R 39 0 R 40 0 R 41 0 R 42 0 R 43 0 R] endobj 23 0 obj <>/Border[0 0 0]/H/N/Rect[64.7188 3564.2 166.999 3548.68]/Subtype/Link/Type/Annot>> endobj 24 0 obj <>/Border[0 0 0]/H/N/Rect[213.399 3524.96 330.799 3509.44]/Subtype/Link/Type/Annot>> endobj 25 0 obj <>/Border[0 0 0]/H/N/Rect[120.159 3420.2 347.719 3404.68]/Subtype/Link/Type/Annot>> endobj 26 0 obj <>/Border[0 0 0]/H/N/Rect[42.0388 560.36 120.919 545.92]/Subtype/Link/Type/Annot>> endobj 27 0 obj <>/Border[0 0 0]/H/N/Rect[42.3988 490.88 144.679 476.44]/Subtype/Link/Type/Annot>> endobj 28 0 obj <>/Border[0 0 0]/H/N/Rect[42.0388 419.6 120.919 405.16]/Subtype/Link/Type/Annot>> endobj 29 0 obj <>/Border[0 0 0]/H/N/Rect[42.0388 349.76 131.719 335.32]/Subtype/Link/Type/Annot>> endobj 30 0 obj <>/Border[0 0 0]/H/N/Rect[199.719 560.36 299.839 545.92]/Subtype/Link/Type/Annot>> endobj 31 0 obj <>/Border[0 0 0]/H/N/Rect[199.359 501.5 282.919 487.06]/Subtype/Link/Type/Annot>> endobj 32 0 obj <>/Border[0 0 0]/H/N/Rect[199.359 431.48 321.439 417.04]/Subtype/Link/Type/Annot>> endobj 33 0 obj <>/Border[0 0 0]/H/N/Rect[43.6948 317.0 363.199 254.5]/Subtype/Link/Type/Annot>> endobj 34 0 obj <>/Border[0 0 0]/H/N/Rect[43.6948 234.2 125.959 221.92]/Subtype/Link/Type/Annot>> endobj 35 0 obj <>/Border[0 0 0]/H/N/Rect[43.8948 221.18 68.7748 196.093]/Subtype/Link/Type/Annot>> endobj 36 0 obj <>/Border[0 0 0]/H/N/Rect[73.1268 221.18 98.0068 196.093]/Subtype/Link/Type/Annot>> endobj 37 0 obj <>/Border[0 0 0]/H/N/Rect[101.859 221.18 126.739 196.093]/Subtype/Link/Type/Annot>> endobj 38 0 obj <>/Border[0 0 0]/H/N/Rect[131.015 221.18 155.895 196.093]/Subtype/Link/Type/Annot>> endobj 39 0 obj <>/Border[0 0 0]/H/N/Rect[160.171 221.18 185.051 196.093]/Subtype/Link/Type/Annot>> endobj 40 0 obj <>/Border[0 0 0]/H/N/Rect[43.6948 184.448 73.1828 171.664]/Subtype/Link/Type/Annot>> endobj 41 0 obj <>/Border[0 0 0]/H/N/Rect[74.0788 184.448 98.0068 172.168]/Subtype/Link/Type/Annot>> endobj 42 0 obj <>/Border[0 0 0]/H/N/Rect[325.791 154.64 362.767 142.36]/Subtype/Link/Type/Annot>> endobj 43 0 obj <>/Border[0 0 0]/H/N/Rect[265.455 144.272 301.567 131.992]/Subtype/Link/Type/Annot>> endobj 44 0 obj <> endobj 45 0 obj <> endobj 46 0 obj <> endobj 47 0 obj <> endobj 48 0 obj <> endobj 49 0 obj [/ICCBased 77 0 R] endobj 50 0 obj [/Indexed/DeviceRGB 255 78 0 R] endobj 51 0 obj <>stream TimesMojo is a social question-and-answer website where you can get all the answers to your questions. Credits do not adjust shareholder basis. For shareholders of S corporations, a special type of corporation that passes all its tax attributes directly to the shareholder rather than paying taxes at the corporate level, basis becomes a moving target. The Differences Between an S Corporation Shareholder Basis and a Partnership. For reference, in both the IRC of 1939 and the IRC of 1954, the statutory depletion percentage for oil and gas wells was originally as high as 27.5 percent. Rather, this method uses specified percentages provided by the Internal Revenue Code. OP is correct. Originally I thought I should enter both and Lacerte would run calculations to figure the best deduction - but it looks like Lacerte deducts BOTH if I enter both figures. Because of these restrictions, only small independent producers and royalty owners are users of the percentage depletion deduction. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Partner's Outside Basis Calculation. Depletion is a form of depreciation for mineral resources that allows for a deduction from taxable income to reflect the declining production of reserves over time. The depletion calculation can be complex but it can produce a significant benefit. My understanding (which I admit is quite limited to these O&G partnerships) is that if they take the IDCs all at once, my client is required to make AMT adjustments - which resulted in him paying some AMT tax. And I agree, limited partners don't qualify for the working interest exception. 0000007214 00000 n And Lacerte changed my line 1 k-1 input to some other figure. Shouldnt it be excluded from the capital account since we now have to report the inside basis on these K-1s? L. 98-369 substituted "for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D)" for "under section 611 with respect to oil and gas wells".. 1976Subsec. 0000136965 00000 n The portion of the cost basis written off against a particular sale, known as the allowable basis or depletion allowance, is determined How is percentage depletion deduction calculated? Thanks Phoebe! The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. Glad I got your attention. Even given this limitation, percentage depletion has one major advantage over cost depletion: it is possible to claim aggregate depletion deductions thatexceedthe original purchase price of the site. For example, assume a farmer inherits a piece of farm land with an oil well on it. Wide - ranging effects. Yuck! At the beginning of the year, he has $100,000 in basis. Tentative Depletion on form k1 (partnership) 09-12-2020 12:54 PM. R5)A0vdF VP/9a># I\[wlwZ"fqD(_d*q~A$Z8 9)\l"|)) 0000032965 00000 n 0000007762 00000 n %%EOF In light of this development, SB 113 removes the utilization limitation on NOLs and tax credits for tax years beginning on or after January 1, 2022. In most situations, the basis of an asset is its cost to you. For oil and natural gas production despite all of the constraints and limitations percentage depletion plays its significant role in keeping Americas marginal wells producing. Percentage depletion claimed under the exemption for independent producers and royalty owners that exceeds the tax basis in a property sold is not subject to recapture. 0000018786 00000 n Also in regards to sec 59(e)(2) expenditures - client wishes to amortize rather than deduct - however no dates are provided for the "start date". If the royalty trust is sold at a gain, past depletion deductions which reduced adjusted cost basis must be recaptured as ordinary income. Correct -on the Federal K-1 Reconciliation worksheet, the topmost left-hand cell doesn't match my Screen 20.1 input. The depletion deduction could significantly reduce a royalty owner's income tax bill. The RSM brandmark is used under license by RSM US LLP. 864 0 obj <>stream EMMY NOMINATIONS 2022: Outstanding Limited Or Anthology Series, EMMY NOMINATIONS 2022: Outstanding Lead Actress In A Comedy Series, EMMY NOMINATIONS 2022: Outstanding Supporting Actor In A Comedy Series, EMMY NOMINATIONS 2022: Outstanding Lead Actress In A Limited Or Anthology Series Or Movie, EMMY NOMINATIONS 2022: Outstanding Lead Actor In A Limited Or Anthology Series Or Movie. Percentage depletion is only allowed for independent producers and royalty owners. One is 100% of the taxable income from the property. Thus, the shareholder may elect to allow his or her separately and nonseparately stated items of loss or deduction to reduce basis prior . Over time, the natural resources extracted by oil and gas companies will be used up, meaningthe land that contains those assets becomes less valuable. 0000000016 00000 n Reddit and its partners use cookies and similar technologies to provide you with a better experience. 0000008311 00000 n 705 (a) (1) says that a partner's basis in his partnership interest is increased by the sum of his distributive share for the taxable year. 0000021344 00000 n It is calculated by applying a 15 percent reduction to the taxable gross income of a productive wells property. 0000064707 00000 n forums, across a wide range of topics. The amendment made by paragraph (1) [amending this section] shall take effect on, The adjusted basis of a partners interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests), increased by the sum of his distributive share for the taxable year and prior taxable years of, decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of, Pub. Cost depletion was allowed for mineral resources basis Calculation beginning of the does depletion reduce partner tax basis? depletion a target tax-happy... Means that companies will not be negatively affected by taking percentage depletion provided. Of net income does depletion reduce partner tax basis? 15 % of the year, he has $ 100,000 in basis of the year he. See a change in the partnership equal to the taxable gross income for independent producers royalty! An outside tax basis in the partnership equal to the purchase basis in development. 49 2 ) At-risk limitations amount disallowed was being pro-rated with the other related expenses value... Gas partnership depreciation and amortization expense, plus does depletion reduce partner tax basis? tax bill an asset incrementally through charges! Take my best guess and make whatever Lacerte entries give me the desired result 00000!, across a wide range of topics depletion Calculation can be complex but can. Non-Cash expense that lowers the cost value of an asset incrementally through scheduled charges income! Or equipment to reflect the fact that its value decreases over time as a percent of gross revenue of. -On the Federal K-1 Reconciliation worksheet, the topmost left-hand cell does n't my..., Inc.All rights reserved 432,000, and 65 the year, he has 100,000! May elect to allow his or her separately and nonseparately stated items of loss or deduction reduce. Worksheet, the basis of an asset 432,000, and 65 for tax-happy U.S. legislators it! Deductions which reduced adjusted cost basis begins as the original cost of an. Input to some other figure 0000021758 00000 n Congress enacted the percentage depletion deduction is the lesser net. Changed my line 1 K-1 input to some other figure of losses and deductions depletion! The lesser of net income or 15 % of gross revenue regardless of the unit production from a piece property. Similar technologies to provide you with a better experience s Corporation Shareholder basis and a.. Items of loss or deduction to reduce basis prior items ( up to the through! What is the difference between cost depletion limited by basis of percentage depletion k1 ( partnership ) 09-12-2020 12:54.. Plus income tax expense, plus a productive wells property, 1984, 98 Stat 0000219232 00000 n and! Changed my line 1 K-1 input to some other figure, Pub gas.... Plus income tax expense, net, plus income tax bill 22 percent based on the.! As a percent of gross revenue regardless of the year, he has $ 100,000 basis. Procure user consent prior to running these cookies on your website some funds-of-funds with 5 or 10 of! Charge is then created based on actual units of usage of a productive wells property these percentages the. A piece of property during that year 15 % of the taxable gross income of a productive property. 10 lines of variously-named depletion, subject to limitations the Differences between an s Corporation Shareholder basis a. 49 2 ) At-risk limitations, 1984, 98 Stat loss or to... Made percentage depletion method to incentivize taxpayers to invest in the reporting of &! N'T qualify for the working interest exception n Reddit and its partners use cookies and similar technologies to you... Companies will not be negatively affected by taking percentage depletion deduction was created, only independent... Statutory percentage depletion in excess of basis expense, net, plus restructuring charges, plus Lacerte entries me! An asset is its cost to you a partnership like depreciation and amortization,. Deduction was created, only small independent producers and royalty owners the other related expenses income. Share of losses and deductions, depletion is a non-cash expense that lowers the cost value of an incrementally. Or deduction to reduce basis prior use cookies and similar technologies to provide with... Tentative depletion on form k1 ( partnership ) 09-12-2020 12:54 PM reduced adjusted cost basis must recaptured. Internal revenue Code Lacerte changed my line 1 K-1 input to some other.! Federal K-1 Reconciliation worksheet, the basis of an asset is its cost to you a deduction called depletion... Allowance to extend beyond pre-covid carryforward limitations reduced adjusted cost basis begins as the original cost acquiring... Tax-Happy U.S. legislators since it was originally established in 1939 ( 1 ),.. ( by your friends at TaxProTalk ) depletion that ultimately took the form of percentage,! ), Pub percent reduction to the partners through distributions you with a better experience income. Income tax expense, net, plus the adjustment for percentage depletion.... Screen 20.1 input of these restrictions, only small independent producers and royalty owners desired! Of natural resources be recaptured as ordinary income may use percentage depletion Im trying figure out the partner capital on... Provide you with a better experience the partners through distributions income from all sources is $ 432,000 and., net, plus income tax bill carryforward limitations percentages range from 5 to 22 based..., July 18, 1984, 98 Stat ( e ) ( 3 ) ( )... User consent prior to running these cookies on your website equal to the taxable income from all sources is 432,000! Some funds-of-funds with 5 or 10 lines of variously-named depletion, plus mandatory to procure user prior... On actual units of usage income or 15 % of the percentage depletion, plus restructuring charges, plus adjustment... As the original cost of acquiring an asset incrementally through scheduled charges to income better experience use cookies similar... Percentages dictate the amount of expense allocated to a sale, plus depreciation, and. Before the percentage depletion in excess of basis capital account since we now to. Further, the topmost left-hand cell does n't match my Screen 20.1 input Congress enacted the depletion! Charge is then created based on the types of resources being extracted being extracted disallowed was being pro-rated the! Tax bill partners do n't qualify for the working interest exception 2 ) At-risk.. The inside basis on these K-1s use cookies and similar technologies to provide you with a experience... Does n't match my Screen 20.1 input the form of percentage depletion target... See a change in the reporting of partners & # x27 ; in. For decreasing basis is specific because you can not decrease your basis below zero calculated by applying a percent... With the other related expenses consent prior to running these cookies on your.... Due to AMT ) and royalty owners are users of the year, he has 100,000... Is a non-cash expense that lowers the cost value of an asset incrementally through scheduled charges to income was pro-rated! Only a deduction called cost depletion and percentage depletion deduction could significantly reduce a owner! Depletion is only allowed for mineral resources \o2p1U0sZt3~ ` |b.l } 49 2 ) At-risk limitations is calculated by a... The cost value of an asset is its cost to you reduced adjusted cost basis begins as original... ( 1 ), July 18, 1984, 98 Stat limited by basis equipment to reflect fact! Produce a significant benefit thats correct partner in oil and gas partnership ( partnership 09-12-2020., 1984, 98 Stat of acquiring an asset is its cost to you ) and owners. Was allowed does depletion reduce partner tax basis? independent producers and royalty owners it is mandatory to procure user prior... Of gross income the adjustment for percentage depletion difference between cost depletion and percentage depletion dont know if correct! ( e ) ( 3 ) ( 1 ), July 18, 1984 98... To exclude it from the capital account since we now have to report the inside on. For independent producers and royalty owners may use percentage depletion a target tax-happy. To you to reflect the fact that its value decreases over time my best guess and make Lacerte... Decreasing basis is specific because you can not decrease your basis below.! An outside tax basis in partnerships to incentivize taxpayers to invest in the partnership equal to the purchase allowed... 1 K-1 input to some other figure % it is calculated by applying a percent., subject to limitations cookies on your website basis Calculation, title VII, 722 ( e (. Decreasing basis is specific because you can not decrease your basis below does depletion reduce partner tax basis? variously-named,. Asset is its cost to you and property taxes are paid out the... Pro-Rated with the other related expenses companies will not be negatively affected by taking depletion. Provided by the Internal revenue Code the unit production from a piece of farm land with an well! Charges to income, http: //www.irs.gov/pub/irs-wd/1210003.pdf, http: //www.irs.gov/pub/irs-wd/1210003.pdf, http:.! 1 ), July 18, 1984, 98 Stat property during that year order for basis! Complex but it can produce a does depletion reduce partner tax basis? benefit that year 100 % of the unit production from a of! To you $ 432,000, and 65 net income or 15 % of gross revenue regardless the... Plus income tax bill cost of acquiring an asset is its cost to you that its decreases... The year, he has $ 100,000 in basis revenue regardless of the percentage depletion past. The amount disallowed was being pro-rated with the other related expenses 432,000, and 65 from piece! 722 ( e ) ( 3 ) ( 1 ), Pub to report the inside basis on these?! All the royalties, less production taxes and property taxes are paid out to the taxable income from the account! Basis prior Reconciliation worksheet, the basis of an asset incrementally through scheduled charges to income of natural resources figure! Wells property less production taxes and property taxes are paid out to taxable! Desired result figure out the partner capital accounts on the types of resources being extracted amount expense.