The Tax Advantages Of Oil and Natural Gas Investments

In the investment arena of oil and natural gas partnerships, you see a lot of general partnerships crop up in areas that are being drilled (particularly Texas). You might wonder: Why don’t these people form limited partnerships so that they can shield their personal assets from liability in the event that an oil well has a massive tort or contract fallout?

The answer is that there is an extremely lucrative tax deduction called the “income of intangible drilling costs (IDCs) that enables general partnership investors with working interests in oil and natural gas ventures to deduct all of the income that comes from intangible drilling costs. You can also become eligible for this tax deduction if you agree to become a general partner without a working interest, but this comes with the humongous risk of subjecting your household’s balance sheet to personal liability arising from issues with your oil and … Read the rest of this article!