Taxes: Are You Proactive or Reactive?
At the end of the year do you take a box of receipts to you CPA in hopes that the best tax return is filed?
Far too often that can be how many investors and those in private business go about their returns. Never having the time is not an excuse when there are qualified experts like those at Energy Investment Group available.
Investors can lose millions over the years simply by not asking the right questions.
Being proactive this tax season includes asking key questions that impact your personal portfolio’s filing. Long term, short term, minerals, and dividends are just some of the areas that our oil and gas experts can answer for savvy energy investors.
Some of our most frequently asked questions at Energy Investment Group include:
A: You as an investing Venturer, benefit from tax deductions because our tax benefits “flow through” to the Venturers. Although the venture files an information return for federal income tax purposes, the Venture entity itself does not pay income tax. Instead, our Venturers report on their individual returns their percentage of the Venture’s taxable income or loss.
A: Generally, yes, because the deductions generated by our Venturers’ oil and gas working interests ARE NOT treated as “PASSIVE LOSSES”. The Tax Reform Act of 1986 provides that, in most cases, deductions generated after 1986 from investment in which an individual does not materially participate are treated as “passive losses” and can be deducted only against “passive income”. However, the law contains an exception under which, among other things, DEDUCTIONS GENERATED BY OIL AND GAS WORKING INTERESTS OWNED THOUGH GENERAL PARTNERSHIPS OR JOINT VENTURES ARE NOT CONSIDERED “PASSIVE LOSSES” so Venturers can deduct these losses against their income from other sources. Similarly, any income subsequently generated by such Ventures will not be treated as “passive income”.
A: Our oil and gas drilling programs are specifically designed to generate various tax deductions from drilling and operating oil and gas wells. These deductions include intangible drilling costs (IDC), depreciation and operating costs. In addition, when production is achieved, our Venturers claim a depletion deduction with respect to their share of the Venture’s income from the oil and gas produced.