This may just another chapter in the “Smart Clients doing dumb things” book. I have a client who purchased a 4% working interest in a prospective oil well. He incurred Unrecoverable Intangible Drilling and Testing Expense which he wants to deduct fully. I’m aware that this is allowed but my question is do I put it on the 4652 or on Other Expenses of the Schedule “C”.
He also incurred Recoverable Tangible Expense in the form of Leasehold and Equipment which must be depreciated. Is this 7 year property or must it be factored in with the cost depletion? Is it true that no part of the Tangible expense may be deducted until the well comes into production, or more likely fails?
He also incurred Recoverable Tangible Expense in the form of Leasehold and Equipment which must be depreciated. Is this 7 year property or must it be factored in with the cost depletion? Is it true that no part of the Tangible expense may be deducted until the well comes into production, or more likely fails?