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15 Cards in this Set
- Front
- Back
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Facts about oil gas partnerships
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-Popular tax shelter inv
-Inv can write off more in the early years -Bears more risk than a REDPP |
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Main advantages of oil and gas partnerships
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1.Intangible drilling costs
2.Depletion 3.tax deferral 4.Flow thru of tax benefits 5.Depreciation deduction in equipment |
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Depletion allowances
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-Based on the amount of oil SOLD
-Apples to oil, mineral and timber |
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Intangible drilling costs
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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 |
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Equipment costs
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Machinery, toold, pipe and casing must be depreciated over time and are NOT subject to depletion
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Dry hole costs
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Drilling costs incurred on a well that does not produce oil
-Intangible |
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Exploratory drilling program
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-Drill in areas w UNPORVEN reserves(wildcatting)
-Greatest risk,potential for greatest return |
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Developemental drilling program
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-Drill in areas of proven reserves
-Returns are less under a successful developement program than a successful exploratory program |
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Balanced drilling program
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-Drill both exploratory and developemental
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Oil & gas income
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Buy properties that are already producing
-Looking for INCOME not WRITE-OFFS -lowest risk |
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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
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Overriding royalty sharing arrangement
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-Sponsor does not pay any costs realted to drilling
-Shares in revenues as soon as the first oil and gas is removed |
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Disproportionate sharring arrangement
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-SPonsor receives a share of the rev that is greater than his participationg costs
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Subordinated working interest
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Sponsor does not bear any costs relating to drilling wells
-does not share in revenues until investors recover their inv |
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Functiona allocation sharring arrangement
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-Most commonly use
-Sponsor bears all capital tangible costs of drilling wells -Inv bears all intangible costs which are deductible as they are incurred |
