ChEcK iT OuT...
Why Own stock in oil and gas companies? With Diamond A Energy YOU can Own a working Interest in the oil and gas well(s).
Each 5% (WORKING INTEREST)
For a successful commercial oil/gas well:
Initial investment for well..........$1,500.00
Completion of well...................$1,500.00
Total investment for a successful well..$3,000.00
Total cost for an unsuccessful well
Cost to "plug" or seal well..........$1,500.00*
Total cost for Dry hole ($1500.00)*. Diamond A Energy Corporation will refund, to the investor, the portion on unused funds within 30 days after the well is "plugged".
*This is entirely tax deductible; see tax benefits below
TAX BENEFITS:
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 in an oil and/or gas drilling venture, he/she is allowed to write off all of the intangible drilling costs the first year. This usually amounts to 50% to 85% of the total investment. The remaining percentage that 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; 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 nontaxable 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).
TAX BENEFITS:
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 is 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 contractor 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 nontaxable, therefore producing tax-sheltered income. Most drilling operations of this nature qualify for these tax benefits,
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.
· Furthermore, these tax benefits are not available to the large oil companies.
WARNING:
As world conditions and other world events change, so do the Oil & Gas Tax and Securities laws change. These changes have a profound impact on the Oil & Gas Industry. We strongly advise you to consult with your Legal, Tax and Investment Counsel, since this Memorandum is not intended to provide legal, investment or tax advice.
