Diamond A Energy (fka DAECE)

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thank you wallstreet1991...

and it is articles and web sites like you posted and experience..that teach and have taught Diamond A Energy how to do it right.

your post is a great "template" to initiate one's due diligence.....there is NO substitute!
the more one knows the better...period

one note upon the power of owning a working interest in oil and gas wells is...

Attention:

Tax Advantages of Domestic Oil and Gas Investments

It is essential for the investor to calculate their tax position before considering an oil or gas investment. Probably the most significant cost feature in oil and gas investing is the effect of federal income tax legislation. It is imperative that an investor understands the tax advantages in order to fully appreciate the benefits of investing in oil and gas. Briefly stated, the investor uses a portion of their tax dollars for investing instead of sending that money to the government for yearly income tax payment. This tax break is given as an incentive to encourage new drilling ventures within the United States.

The following is an example: If an Individual invests an amount of money in an oil or gas drilling venture, they are allowed to write off all of the intangible drilling costs the first year. This usually amounts to 50% to 75% of the total investment. The remaining percentage is not written off the first year must be taken over a five to seven year period. Eventually the entire investment will and can be written off,

Furthermore, the tax savings are achieved with or without any loss of capital. In addition to tax money saved up front, the depletion allowance for oil and gas states that $0.15 on every gross dollar returned to the investor is non-taxable money starting the second year through the entire life of the wells. Thus, Investing in Oil and Gas not only creates a tax shelter, but also generates a tax-sheltered income.

Tax Benefits

Congressional Incentives

In 1986 Congress provided tax incentives to stimulate domestic production financed by private investment. These tax benefits enhance the economics of an oil and gas investment already feasible due to the depression of the oil and gas industry. With the passage of the Tax Reform Act of 1986, oil and gas are one of the most tax-advantaged investments. This act specifically exempts oil and gas working interests from being classified as "Passive Income" (see Section 469(c)(3) of the Tax Code).

Federal Income Tax The basic tax considerations involved in an oil and gas-drilling program are as follows:

· Dry Hole: 100% of all dollars invested are written off as a loss against your ordinary income in the first year.

· Producing Well: Generally your investment INCLUDES what are known as Intangible Drilling Costs (IDC's) and (IDC's) may be written off your ordinary income in the first year. IDC's include labor-intensive costs such as the drilling contactor and professional services and are reported to the investor at the end of the year.

· Generally your investment also includes Tangible Drilling Costs (TDC's) which are depreciated over a seven-year period using the Accelerated Cost Recovery System (ACRS). TDC's include pipe, storage tanks, and wellhead equipment, capitalized and depreciated.

· Percentage Depletion Allowance: Currently 15%, making fifteen cents of every gross income dollar non-taxable, therefore producing tax sheltered income. Most drilling operations of this nature qualify for these tax benefits, against Ordinary Income.

Essentially, a person in a high tax bracket can save as much as $13,000 to $15,000 cash off their annual tax payment on an investment of $50,000, or roughly $6,500 to $9,000 on an investment of $25,000, etc. The tax savings can be substantial and unlike many investments, an oil and gas joint venture does not require active participation in order to receive tax benefits.


· Further more These tax benefits are not available to the large oil companies.



WARNING:

Oil & Gas, Tax and Securities laws change Frequently, as do the World conditions and other current World events that can have a direct impact on the Oil&Gas Industry, You are strongly advised to consult legal counsel or the appropriate professional, this site is not intended to provide Legal, Investment, or Tax advice in anyway so please contact your Legal Counsel or CPA Pertaining to your direct situation.

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