To encourage the development of domestic oil and gas production, U.S. Tax Code provides numerous substantial tax deductible expenses.
Tax Deductible Expenses for General and Limited Partnerships include:
Intangible Tax Deductible Expenses:
These expenses generally constitute 65−80% of the total cost of drilling a well and are 100% deductible in the year incurred. Intangible Tax Deductible Expenses include everything but the actual drilling equipment. Labor, chemicals, repairs, hauling and other miscellaneous items necessary for drilling are considered intangible.
Tangible Tax Deductible Expenses:
These expenses are also 100% deductible but must be depreciated over seven years. Tangible Tax Deductible Expenses pertain to the actual direct cost of the drilling equipment.
These expenses are 100% deductible in the year they are incurred. These include the purchase of lease and mineral rights, lease operating costs and all administrative, legal and accounting expenses.
Small Producer Tax Exemptions:
A small producer’s tax exemption known as the “Percentage Depletion Allowance” allows for 15% of the Gross Income from oil and gas producing wells to be tax-free. Enacted by the 1990 Tax Act, this exemption was specifically designed to encourage participation in oil and gas drilling. This tax benefit is limited solely to small companies and investors. Entities or individuals that own more than 1,000 barrels of oil per day, or 6 million cubic feet of gas per day, are excluded.
Our partnerships are eligible through 1031 exchanges, self-directed retirement funds and 401k proceeds.
The below tax scenario is an example and will vary based on each investor’s situation. This graphic is for illustrative purposes only
THIS IS INCLUDED AS GENERAL INFORMATION ONLY. NOTHING HEREIN IS OR SHOULD BE CONSTRUED AS LEGAL OR TAX ADVICE TO ANY INVESTOR. THE INCOME TAX CONSEQUENCES OF THIS INVESTMENT WILL VARY FROM INVESTOR TO INVESTOR, PROJECT TO PROJECT AND BASED ON INVESTOR’S ELECTED PARTICIPATION IN THE PARTNERSHIP. SEE PIPELINE OIL & GAS PARTNERSHIPS PRIVATE PLACEMENT MEMORANDUM FOR MORE INFORMATION ABOUT PARTNERS AND MANAGING PARTNERS. EACH PROSPECTIVE PARTNER IS URGED TO CONSULT SUCH PARTNER ’S PERSONAL TAX ADVISOR WITH RESPECT TO STATE AND FEDERAL INCOME TAX CONSEQUENCES OF HIS/HER PARTICIPATION AS A PARTNER IN THE PARTNERSHIP.