Tax Benefits " Individuals"

 

Tax Benefits
Investing in oil has long enjoyed superior tax treatment for the investor with a significant income tax liability. The risk associated with the investment has been offset by the ability to deduct the entire investment, regardless of the success or failure of the investment from ordinary income. This tax treatment has been in place for many years with some modification and sets the investment apart from most other types of investments.

Deductions
Today a properly structured drilling venture can result in the entire investment being deductible in the tax year in which it is made. For most investors, who are not integrated oil companies and are classified as “Independent producers”, the deduction is exempt from Alternative Minimum Tax with a limitation of forty percent of AMT income.

Tax Free Income
Gross income from the investment is fifteen percent tax exempt under the "percentage depletion allowance" provision and is also exempt from Alternative Minimum Tax for the Independent producer.

Tax treatment plays a significant role in the consideration of an investment in an oil and gas drilling venture and is best suited to those who can effectively take advantage of the tax benefits.

Tax Effects Comparison
An interactive calculator is available under Interactive Tools which you can use to compare tax effects of the investment with a cash rate of return as well as changes in product prices and rates of production.

This is a brief general discussion of certain tax aspects one should consider when contemplating an investment. This is not to be construed as either tax or investment advice. 

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Internal Revenue Service forms for individuals and corporation containing certain information discussed here a available below (areas of interest have been highlighted on each form).