Final answer:
Depletion for a sole proprietor is reported on Schedule C, not Schedule D, and is used to account for the reduction of a product's reserves on a sole proprietor's tax return.
Step-by-step explanation:
The statement that depletion reported by a sole proprietor is reported on Schedule D is false. Depletion, which is a method to account for the reduction of a product's reserves, is actually reported on Schedule C (Form 1040), Profit or Loss from Business, for sole proprietors. Schedule D is used for reporting capital gains and losses. As a sole proprietor, if you own resources that are being depleted, such as timber, oil, or gas properties, you would factor in the depletion allowance to calculate your taxable income on Schedule C, which will then affect your overall income reported on your personal income tax return.