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Oil Investing Tax Shelter
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id='quoteauthor'>Source: AEI Ideas</span>", "<span id='quote'>Oil production in the Lone Star State has more than doubled in less than three years, from 1.142 million barrels of oil per day (BOPD) in July 2010 to 2.295 million BOPD in February 2013.</span> <span id='quoteauthor'>Source: AEI Ideas</span>", "<span id='quote'>The exponential increase in Texas oil output over roughly the last three years has completely reversed the previous 23-year decline in the state’s oil production that took place from 1986 to 2009.</span> <span id='quoteauthor'>Source: AEI Ideas</span>", "<span id='quote'>In mid-2009, Texas was producing less than 20% of America’s domestic crude oil. 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class="menu-item menu-item-type-post_type menu-item-object-page ss-nav-menu-item-6 ss-nav-menu-item-depth-0 ss-nav-menu-reg"><a href="https://web.archive.org/web/20150312081101/http://www.arescotx.com/latest-news/"><span class="wpmega-link-title">News</span></a></li><li id="menu-item-65" class="menu-item menu-item-type-post_type menu-item-object-page ss-nav-menu-item-7 ss-nav-menu-item-depth-0 ss-nav-menu-reg"><a href="https://web.archive.org/web/20150312081101/http://www.arescotx.com/contact-us/"><span class="wpmega-link-title">Contact</span></a></li></ul></div></div><!-- end topNav --> <div class="yellow"> </div><!-- end yellow --> <div class="white"> <h1>Oil Investing Tax Shelter</h1> <div class="ezcol ezcol-two-third"> <h2>Invest in oil and deduct 100% of intangible drilling costs off your taxable income for 2014.</h2> <p><img class="alignnone size-full wp-image-4941" src="https://web.archive.org/web/20150312081101im_/http://www.arescotx.com/wp-content/uploads/oil-investing-tax-shelter.png" alt="oil-investing-tax-shelter" width="693" height="200"/></p> <p>Now is the perfect time to reevaluate your investment portfolio to help <em>reduce your overall tax burden</em> in April. A direct investment in an oil and gas drilling partnership can provide <em>significant tax write-offs</em> while also providing the added benefit of consistent cash flow and return on investment potential.</p> <p>Instead of paying more to Uncle Sam, put more of your money to work instead.</p> <p><strong><a href="https://web.archive.org/web/20150312081101/http://www.arescotx.com/about-aresco/oil-investing-tax-shelter/oil-investment-tax-write-offs/" target="_blank" rel="attachment wp-att-4952"><img class="alignleft wp-image-4952 size-medium" style="border: 0px none; margin: 5px 10px;" src="https://web.archive.org/web/20150312081101im_/http://www.arescotx.com/wp-content/uploads/oil-investment-tax-write-offs-300x179.gif" alt="Oil Investment Tax Write-Offs" width="300" height="179"/></a>100% Tax Write Off of Intangible Drilling Costs (IDC) with a Direct Investment in Oil & Gas</strong><br/> Intangible Drilling Costs (IDCs) are drilling expenses related to labor, fuel, chemicals, hauling, etc. IDCs usually represent 70% to 85% of the cost of a well can be deducted 100% against taxable income in the first year. For example, if you invested $50,000 today in a project that had 85% of its costs in IDCs, you could elect to deduct $42,500 from your taxable income for 2014. If you are in the top 39.6% federal tax bracket this deduction could save you approximately $14,875 in federal income taxes – please speak with your tax advisor for information specific to your situation.</p> <p>IDCs deductions are available in the year the money was invested, even if the well does not start drilling until March 31 of the year following the contribution of capital. <strong>Aresco has immediate drilling opportunities for immediate 2014 tax deductions.</strong></p> <h3>Other Direct Oil Investment Tax Deductions & Tax Benefits</h3> <p><strong>Tangible Drilling Costs – Capitalized and depreciated over a 7-year period</strong><br/> Oil and gas drilling equipment such as casing, pump jacks, and wellheads are considered Tangible Drilling Costs (TDCs). Continuing with the example above, the remaining $7,500 (15% of the cost of the well) would be classified as TDCs.</p> <p><strong>Intangible Completion Costs – Deductible in the year they are incurred</strong><br/> Intangible Completion Costs are generally related to non-salvageable goods and services, such as labor, completion materials, completion rig time, fluids etc. ICCs usually amount to about 15% of the total well cost and provide a great tax benefit.</p> <p><strong>Depreciation – Depreciated over a 7-year period</strong><br/> While services and materials used during the drilling process offer no salvage value, equipment used in the completion and production of a well is generally salvageable. Items such as these are usually depreciated over a seven-year period, utilizing the Modified Accelerated Cost Recovery system or MACRS. Equipment in this category includes casing, tanks, wellhead and tree, pumping units etc. Equipment and tangible completion expenses generally account for 25 to 40% of the total well cost.</p> <p><strong>Depletion Allowance – Shelter 15% of the well’s annual production from income tax</strong><br/> Once an oil or gas well is in production, the working interest owners in the well are allowed to shelter some of the gross income derived from the sale of the oil and/or gas through a depletion deduction. Two types of depletion are available, cost and statutory (also referred to as percentage depletion). Cost depletion is calculated on the relationship between current production as a percentage of total recoverable reserves. Statutory or percentage depletion is subject to several qualifications and limitations. This deduction will generally shelter 15% of the well’s annual production from income tax.</p> <p><strong>Lease Operating Expense– Tax Deductible in the year they are incurred without AMT consequences</strong><br/> Lease Operating Expenses cover the day-to-day costs involved with the operation of a well. The expense also covers the costs of re-entry or re-work of an existing producing well.</p> <p>Lastly, the tax benefits from oil and natural gas production have historically triggered potential taxation under the Alternative Minimum Tax (AMT). However, Congress provided some tax relief in the early 1990’s for “independent producers”. An independent producer was defined as an individual or company with production of 1,000 barrels per day or less. Although there is still the potential for AMT taxation for excess IDCs, percentage or statutory depletion is no longer considered a preference item.</p> <p>The above general discussion is provided for background information only. This information is not intended to be individual advice. Prospective participants should consult with their personal tax professional regarding the applicability and effect of any and all benefits for their own personal tax situation. In addition, tax laws change from time to time and there is no guarantee regarding the interpretation of any tax laws. For more information, please visit www.irs.gov.</div> <div class="ezcol ezcol-one-third ezcol-last"> <h2><span style="color: #993300;">Contact us today for more information </span>on how drilling investments may help reduce your overall tax burden.</h2> <div class="gf_browser_unknown gform_wrapper" id="gform_wrapper_3" style="display:none"><form method="post" enctype="multipart/form-data" id="gform_3" action="/web/20150312081101/http://www.arescotx.com/about-aresco/oil-investing-tax-shelter/"> <div class="gform_body"><ul id="gform_fields_3" class="gform_fields top_label form_sublabel_below description_below"><li id="field_3_1" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label" for="input_3_1">First Name<span class="gfield_required">*</span></label><div class="ginput_container"><input name="input_1" id="input_3_1" type="text" value="" class="large" tabindex="1" onchange="gf_apply_rules(3,[0]);" onkeyup="clearTimeout(__gf_timeout_handle); __gf_timeout_handle = setTimeout("gf_apply_rules(3,[0])", 300);"/></div></li><li id="field_3_2" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label" for="input_3_2">Last Name<span class="gfield_required">*</span></label><div class="ginput_container"><input name="input_2" id="input_3_2" type="text" value="" class="large" tabindex="2" onchange="gf_apply_rules(3,[0]);" onkeyup="clearTimeout(__gf_timeout_handle); __gf_timeout_handle = setTimeout("gf_apply_rules(3,[0])", 300);"/></div></li><li id="field_3_3" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label" for="input_3_3">Phone<span class="gfield_required">*</span></label><div class="ginput_container"><input name="input_3" id="input_3_3" type="text" value="" class="large" tabindex="3" onchange="gf_apply_rules(3,[0]);" onkeyup="clearTimeout(__gf_timeout_handle); __gf_timeout_handle = setTimeout("gf_apply_rules(3,[0])", 300);"/></div></li><li id="field_3_4" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label" for="input_3_4">Email<span class="gfield_required">*</span></label><div class="ginput_container"> <input name="input_4" id="input_3_4" type="text" value="" class="large" tabindex="4" onchange="gf_apply_rules(3,[0]);" onkeyup="clearTimeout(__gf_timeout_handle); __gf_timeout_handle = setTimeout("gf_apply_rules(3,[0])", 300);"/> </div></li><li id="field_3_7" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label">Ideal Investment Amount<span class="gfield_required">*</span></label><div class="ginput_container"><ul class="gfield_radio" id="input_3_7"><li class="gchoice_3_7_0"><input name="input_7" type="radio" value="$25,000" id="choice_3_7_0" tabindex="5" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_7_0" id="label_3_7_0">$25,000</label></li><li class="gchoice_3_7_1"><input name="input_7" type="radio" value="$50,000" id="choice_3_7_1" tabindex="6" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_7_1" id="label_3_7_1">$50,000</label></li><li class="gchoice_3_7_2"><input name="input_7" type="radio" value="$100,000" id="choice_3_7_2" tabindex="7" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_7_2" id="label_3_7_2">$100,000</label></li></ul></div></li><li id="field_3_8" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label">Immediate Goals<span class="gfield_required">*</span></label><div class="ginput_container"><ul class="gfield_radio" id="input_3_8"><li class="gchoice_3_8_0"><input name="input_8" type="radio" value="Investment Income" id="choice_3_8_0" tabindex="8" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_8_0" id="label_3_8_0">Investment Income</label></li><li class="gchoice_3_8_1"><input name="input_8" type="radio" value="Tax Deductions" id="choice_3_8_1" tabindex="9" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_8_1" id="label_3_8_1">Tax Deductions</label></li><li class="gchoice_3_8_2"><input name="input_8" type="radio" value="Both" id="choice_3_8_2" tabindex="10" onclick="gf_apply_rules(3,[0]);"/><label for="choice_3_8_2" id="label_3_8_2">Both</label></li></ul></div></li><li id="field_3_11" class="gfield gsection field_sublabel_below field_description_below"><h2 class="gsection_title">Accredited Investor Status</h2></li><li id="field_3_9" class="gfield gfield_contains_required field_sublabel_below field_description_below"><label class="gfield_label">Are you an Accredited Investor?<span class="gfield_required">*</span></label><div class="ginput_container"><ul class="gfield_radio" id="input_3_9"><li class="gchoice_3_9_0"><input name="input_9" type="radio" value="I am not an investor. I am a spam robot (we hate spam as much as you do)" id="choice_3_9_0" tabindex="11" onclick="gf_apply_rules(3,[0,6]);"/><label for="choice_3_9_0" id="label_3_9_0">I am not an investor. I am a spam robot (we hate spam as much as you do)</label></li><li class="gchoice_3_9_1"><input name="input_9" type="radio" value="(Individual Investors Only): I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a combined net worth, in excess of $1 million exclusive of primary residence or furnishings –– OR –– I certify that I am an unmarried accredited investor because I had individual income of more than $200,000 in each of the past two years or I am married with a joint income of more than $300,000 in each of those years. I reasonably expect to reach the same income level in the current year." id="choice_3_9_1" tabindex="12" onclick="gf_apply_rules(3,[0,6]);"/><label for="choice_3_9_1" id="label_3_9_1">(Individual Investors Only): I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a combined net worth, in excess of $1 million exclusive of primary residence or furnishings –– OR –– I certify that I am an unmarried accredited investor because I had individual income of more than $200,000 in each of the past two years or I am married with a joint income of more than $300,000 in each of those years. 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