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>> Today: Sunday, May 18, 2008
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| Input your total investment and tax rate to see your potential tax savings this year: |
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BASIC TAX CONSIDERATIONS
The Basic Tax Considerations Involved in an Oil & Gas Investment:
1. Intangible Drilling Costs:
Intangible drilling costs
are any costs associated with the drilling prospect that cannot be re-sold.
These costs may be deducted against active, passive or portfolio income in
the year incurred. Consult your tax advisor.
2. Tangible Drilling Costs:
Tangible drilling costs
include all items associated with the drilling of the prospect that can be
re-sold, such as tanks, wellhead equipment, etc. These costs may be depreciated
over six years, 20% the first year and the balance over the next five years.
3. Depletion Allowance:
Depletion allowance allows
you to receive the first 15% of your revenue income tax free. This means you
are paying income taxes on only 85% of your well income.
Example of Tax Benefits
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$150,000.00
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2.00% Drilling Working Interest1
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-37,500.00
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Leasehold & Tangible Drilling Costs
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$112,500.00
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Intangible Drilling Costs
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$112,500.00
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1st year deduction for Intangible Drilling Costs
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+$7,500.00
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1st year depreciation for Tangible & Leasehold Costs
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$120,000.00
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Total 1st year deductions
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x 35%
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(enter your tax bracket)
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$42,000.00
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Total 1st year cash value of deductions *
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$150,000.00
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Investment for 2.00% Drilling Working Interest
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-42,000.00
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1st year cash savings from tax deductions
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$108,000.00
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After Tax Cash Investment *
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1. INVESTMENTS RANGE FROM $40,000.00 UP TO $200,000,000.00+
* THE PRECEDING PROJECTIONS WERE PREPARED USING INFORMATION DEEMED TO BE RELIABLE AS OF THE ISSUE DATE AND ARE INTENDED ONLY AS A PROJECTION OF WHAT TAX SAVINGS MAY BE EXPECTED FROM AN INVESTMENT UNDER CERTAIN ASSUMED FAVORABLE CONDITIONS. THE INFORMATION SET FORTH ABOVE SHOULD NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN AS AN ILLUSTRATION OF THE TAX BENEFITS THAT MAY BE REALIZED UNDER CERTAIN ASSUMED CONDITIONS. THIS INFORMATION SHOULD IN NO WAY BE CONSTRUED OR RELIED UPON AS TAX ADVICE. THESE TAX DEDUCTIONS MAY BE SUBJECT TO ALTERNATIVE MINIMUM TAX OR OTHER TAX CONSIDERATIONS.
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