Oil & Gas Question

[DaveO]

I hope some of you who work with oil and gas leases can help me out. I have a client who owns a royalty interest in an oil well. The state withholds severance tax from his payments. I know that the tax is included in his gross income for the purpose of calculating depletion. My question is the severance tax a deduction for income tax purposes?

[Jiggers]

Oil & Gas

I hope some of you who work with oil and gas leases can help me out. I have a client who owns a royalty interest in an oil well. The state withholds severance tax from his payments. I know that the tax is included in his gross income for the purpose of calculating depletion. My question is the severance tax a deduction for income tax purposes?

The severance tax is deductible on Schedule E.

As is the legal fees for preparing the lease documents.

And some taxing entities assess property taxes on the expected royalty, and these are deductible also.

And your fee for preparing the Schedule E!

[DaveO]

Thanks for the reply

It seemed the logical answer but I couldn't locate specific instructions.

[Davc]

And if the well is in OK, don't forget the additional depletion on the OK return.