title>Tax Guru-Ker$tetter Letter Wizard Animation

                 

Tax Guru-Ker$tetter Letter
Saturday, June 10, 2006
 
Oil Wells

 

Q:

Subject: tax question
 
thanks for your interesting blog.
 
i have question for you.
 
suppose i invest 10k in an oil well.do i get to write it off? is the income it produces, say 5k/yr deductible against my initial investment?
 
regards


A:

There is no one size fits all answer because of the multiple varieties of investments that could be involved.

For example, if you are purchasing oil drilling equipment, it could possibly be expensed under Section 179.

If you are buying the royalty rights to a well, there is a potential to deduct the investment over time as the oil is extracted, as a depletion allowance.

You really need to be working with your own personal professional tax advisor who can look at your proposed investment and give you more accurate advice for that particular situation. 

As I've pointed out in other examples, the last person you should trust for this kind of tax advice is the person trying to sell you the investment.  Those kinds of high commission sales people will tell you anything to make a sale and will be long gone when you discover that the lucrative tax deduction was a lie.

Good luck.

Kerry Kerstetter

 

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