Oil & Gas Investment Marketing Strategies

Analyzing Your Form 1040
Could Save You a Bundle

By Jeanne C. Stilwell

You may want to consult with your financial and tax advisor on this one.

Are you hearing grumbling from frustrated clients complaining about Uncle Sam? It's too late to do much about 1998. However, by reviewing Form 1040, you can help yourself and your clients keep more money for themselves and give less to Uncle Sam in the coming year.

This is a tip from one marketing professional to another.  You might like to try it with your clients.

Intangible Drilling Costs and Depletion

One key way to save on taxes for the right client is to invest in a natural gas drilling program.  Note that suitability requirements are different in each state. For each dollar of intangible drilling cost invested, you receive one dollar of deduction. The deduction comes directly off your income.  Sometimes alternative minimum tax applies. The rule is 40% of your AMTI can be deducted and still use the full deduction in the year of the investment. You will need to consult with your tax advisor. 

One of the highly regarded Financial Planners in the industry, Jack W. Everett, CFP, Roseville, California, once said:

"A word of caution.  Don't invest with somebody who called you on the phone, dialing for dollars. I have seen many clients lose money in this type of investment to promoters who were great money raisers, but poor drillers and operators.  Look for a proven (long term) track record of management, publicly owned companies whose financial statements are audited and can be verified with diversified portfolio of many wells being drilled."

If your client invested in a natural gas drilling program in 1998, this is a good time to review that client's tax return to make sure his or her tax advisors took the deduction properly.

	Form 1040 (Federal)	Page 1, line 17 should be a deduct
	Form 1040 (Federal)	Schedule E, Form 1040 Part 11 – 27A (Self-employed) list investment line 30-31 deduct
	CA Form 540	Line 17 deduct
	Various state forms may be different

Percentage depletion is also a tax advantage.  Percentage depletion is adjusted each year and is based on the "Reference Price" of oil. For 1999, the depletion allowance is 24%.  The depletion allowance in 1998 was 17%.  This means that the dollar coming back to you is, in part, tax free.

Roth Conversions

Last year, Roth conversions saved taxpayers a bundle.  Roth conversion could still be a good deal for you in 1999.  The only thing is, your adjusted gross income must be under $100,000 or you do not qualify. An energy drilling investment (intangible drilling cost) lowers your income and will lower your adjusted gross income.  Check with your tax advisor.

Adjusted Gross Income

Adjusted gross income is found on Form 1040, line 33.  Check for possible future tax saving ideas for 1999.  For example:

q Itemized Deductions in Total	AGI over $124,500
q Medical Expenses	Reduced by 7.%% of AGI
q Miscellaneous Itemized Deductions	Reduced by 2% of AGI
q Personal Exemptions	Phase-out begins at $186,800 for married
q Rental Deduction	AGI over $100,000
q Credits for Children under 17	Modified AGI over $110,000 for married
q Adoption Credit	Modified AGI over $75,000
q Hope Tax Credit	Modified AGI over $80,000 for married
q Lifetime Learning Credit	Modified AGI over $80,000 for married
q Roth IRA	AGI over $150,000 for married
q Roth Rollover of Existing IRA	AGI over $100,000
q Education IRA	AGI over $150,000 for married
q IRA Deduction	AGI over $50,000 for married

Remember the golden rule:

"In presenting any marketing strategy, strongly urge your clients to check with their financial advisors to see how this marketing concept fits in their current situation."

Also, remind your client to carefully read the Prospectus/Offering Memorandum.

This is neither an offer to sell nor a solicitation of an offer to buy any investment. Any offering is made by prospectus only in states which have authorized the sale of any particular offering and only from securities dealers who may lawfully offer the particular security in such states.

Editor's Note:

Jeanne Stilwell brings to this Newsletter a wealth of knowledge and experience concerning oil and gas investment, its evaluation and marketing, gained over 23 years. For questions, call Jeanne at (800) 362-4590.

If you are having problems printing this article, click on a portion of the text of the document.  Clicking on any portion of the text will make the "frame" active and printable.

Copyright © 1997, 1998, 1999, and 2000 by Lewis G. Mosburg, Jr. and Ogden, the Invisible English Sheep Dog

"Lewis Mosburg's OIL & GAS NEWSLETTER"™ and "Lewis Mosburg's OIL & GAS PRIMERS"™  are trademarks of Lewis G. Mosburg, Jr.