TAX BENEFITS ARE SUBSTANTIAL IN OIL AND GAS INVESTMENT
Invest in Oil, Decrease Foreign Dependency
With the state of current affairs, perhaps there is no other time to consider the importance of the United States becoming less dependent on foreign oil. Extracting oil and natural gas from U.S. reserves enables our country to become less dependent on foreign oil, a fact that has prompted congressional officials to create tax benefits designed to encourage accredited investors to invest in oil. Congress included these benefits in the U.S. tax code, offering much reason for why oil and gas investment is a wise choice.
Oil and Gas Investment and Tax Benefits
During the first year, the intangible cost of drilling which includes: mud, labor, grease and chemicals is completely tax deductible. The costs, which make up nearly eighty percent of the cost of a well, are referred to as intangible drilling costs or IDC. On the contrary, the costs of an oil and gas investment that are devoted to equipment are referred to as tangible drilling costs or TDC. Like IDC, tangible drilling costs are also 100% tax deductible during the initial year of investment.
Additionally, lease costs which include, the purchase of leases, sales expenses, legal expense, minerals, lease operating costs (LOC) and administrative accounting are also completely tax deductible.
In 1986 a Tax Reform Act established active and passive income within the U.S. Tax Code. The Tax Reform Act prohibits the counterbalance of losses from passive activities against income from active businesses. The tax code declassifies a working interest in oil and gas investment as being a passive activity, and allows for tax deductions to be offset against revenue from business income, active stock trades and salaries.
Small companies and private citizens benefited in 1990 due to the Tax Act, known to some as the percentage depletion allowance. This tax benefit was created to encourage more to take part in oil and gas investment. While it assists many, these tax benefits are not accessible to entities owning more than 1,000 barrels of oil average daily production, large oil companies, refiners that process more than 50,000 barrels per day or retail petroleum marketers. Instead, this tax incentive makes 15% of the gross income from producing oil and gas to be tax free to smaller producers.
Oil and Gas Investment Opportunity
Oil and Gas Worldwide is pleased to present accredited investors a chance to invest in oil and gas. For more information on oil and gas investment please call 1-800-833-0563.