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15 Cards in this Set

  • Front
  • Back
Facts about oil gas partnerships
-Popular tax shelter inv
-Inv can write off more in the early years
-Bears more risk than a REDPP
Main advantages of oil and gas partnerships
1.Intangible drilling costs
2.Depletion
3.tax deferral
4.Flow thru of tax benefits
5.Depreciation deduction in equipment
Depletion allowances
-Based on the amount of oil SOLD
-Apples to oil, mineral and timber
Intangible drilling costs
Deductible expenses for labor, supplies, fuel, repairs and other items with NO salvage value
-deductible as they are incurred and PAID
-represent a major portion of the 1st yr reductions
Equipment costs
Machinery, toold, pipe and casing must be depreciated over time and are NOT subject to depletion
Dry hole costs
Drilling costs incurred on a well that does not produce oil
-Intangible
Exploratory drilling program
-Drill in areas w UNPORVEN reserves(wildcatting)
-Greatest risk,potential for greatest return
Developemental drilling program
-Drill in areas of proven reserves
-Returns are less under a successful developement program than a successful exploratory program
Balanced drilling program
-Drill both exploratory and developemental
Oil & gas income
Buy properties that are already producing
-Looking for INCOME not WRITE-OFFS
-lowest risk
T or F
If the inv does not meet the assessment by depositing the addt cash, their share of the revenues plus expenses of owership will be automatically reduced
T
Overriding royalty sharing arrangement
-Sponsor does not pay any costs realted to drilling
-Shares in revenues as soon as the first oil and gas is removed
Disproportionate sharring arrangement
-SPonsor receives a share of the rev that is greater than his participationg costs
Subordinated working interest
Sponsor does not bear any costs relating to drilling wells
-does not share in revenues until investors recover their inv
Functiona allocation sharring arrangement
-Most commonly use
-Sponsor bears all capital tangible costs of drilling wells
-Inv bears all intangible costs which are deductible as they are incurred