Replies to This Discussion

Permalink Reply by david reeves on July 4, 2008 at 5:00

Does anybody know if you could use the expenses charged to owners that don't lease as a tax deduction?

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Permalink Reply by Randy on July 4, 2008 at 5:04

It's not carried to you as actual income of any kind. So I don't think so. But I am no tax professional and you should get some advice from a CPA when the time comes.

Randy

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Permalink Reply by Les Bamburg on July 4, 2008 at 5:21

David, I think it gets very complicated since you are receiving revenue and being charged capital and operating expenses. Anyone in this situation would probably need to have their taxes done by a professional.

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Permalink Reply by Snake Stewart on July 4, 2008 at 5:34

If you are a working partner in the well , why wouldn't you be able to deduct said expences.
On Lewis Mosburgs Internet Oil & Gas Newsletter,
www.mosburgoil-gas.com , he states that " All costs associated with a dry hole are currently deductible as Abandonment Loss Cost.Uncle Sam pickes up roughly half of costs.Even the costs of testing and drilling a succesful well are also deductible currently as Intangible Drilling and Development Costs, or "IDC's", that account for 60 % to 70% of all costs associated with production drilling ventures." Not to mention the 15 % royalty deduction that you are allowed. Being an Oil Barron with have its advantages!

It appears that BIG O & G is only taking 1/2 the risk they want us to believe. Even the costs associated with production have a write off , yet are they taking that into consideration before they "tax" my royalty check. Sure sounds like some double dipping to me!

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Permalink Reply by Randy on July 4, 2008 at 5:41

No No No

You would be able to deduct those expenses if you went CONSENT and were a true working partner you in the well. i.e. you paid your pro-rata share up-front of well expenses (1/640 of well cost for an acre) so to receive 100% of royalties from the get-go.

You haven't actually put that money up in a non-consent situation. It's not technically a loss.

----

On your second part, of course their expenses are deductible. The US government wants them to drill, to try to get our country as self-sustaining as possible. Nobody picks on the farmers for this. Yes they are charging you your portion of the expenses, thats not quite the same as taking a tax deduction....IMHO

Randy

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Permalink Reply by Snake Stewart on July 4, 2008 at 8:02

The first part you can take up with Mr. Lewis Mosburg as that was his opinion not mine.The main point I was trying to make was, If 1/2 of the expences that occured are deductible, why would I be penalized prior to deducted amount, thus the "double dipping" comment. Is this another way for O & G to extort unsigned persons ?

Farmers are not coming onto my place and picking my corn ! If they were, surely they wouldn't charge me twice! That looks like what is happening with the 50% deduction for BIG O & G that helps offset the costs that I am still paying full price for.

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Permalink Reply by Gatorguy on July 4, 2008 at 5:16

Does anyone know if the Oil company is required to with hold taxes on the bonus check or if they pay in full and it is up to the land owner to pay taxes in April?

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Permalink Reply by Randy on July 4, 2008 at 5:20

Taxes are not withheld, you will be issued a 1099 at year end in most situations. You are responsible for your own taxes on any bonus & royalties.

Randy

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Permalink Reply by Linda Whatley on June 28, 2010 at 6:08

And you will have to pay estimated taxes each quarter. ......... And, if you don't send them enough, you will have to pay a penalty. ...... So don't go spending all your money till you pay Uncle Sam.

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Permalink Reply by James CD1 on July 4, 2008 at 5:27

can anyone explain the difference of a unsigned land owner in a conservation unit and a voluntary unit. Then what does that do to his share of royalty.

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Permalink Reply by Randy on July 4, 2008 at 5:31

Your terms are a little bit skewed, basically a unit is a unit. If there are interests that are un-leased then it called a conservation unit. If everyone is signed in the unit then it's a voluntary unit. Dept of Conservation has to approve all units.

If you are un-leased then you get your full 8/8's share after the operator has recouped 100% of his drilling/operating expenses.

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Permalink Reply by Kassi on July 4, 2008 at 5:43

A unit can also be made larger than the typical 640 acres on a "voluntary basis" this can reduce your royalty however because it reduces your decimal share. ( your land divided by the total unit size)

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