intangible drilling costs

(redirected from Intangible Drilling and Development Costs)

Intangible Drilling Costs

Expenses a company has when it drills for oil or natural gas. Intangible drilling costs are sometimes convenient for a company's tax purposes because it can deduct intangible drilling costs in one year when the company perhaps found little or no oil from profits made in a different year when the company does find oil.

intangible drilling costs

Expenses incurred while exploring for gas, geothermal, or oil reserves. These items may be expensed in the year incurred, or they may be capitalized and deducted throughout a period of years. Intangible drilling costs are an effective means of reducing taxes because they can be used to offset income in a single year even though the costs were incurred in order to produce or develop a capital asset (energy reserves) that will in turn generate income for many years. Costs for fuel, preparation of a site, and wages are examples of intangible drilling costs.
Mentioned in ?
References in periodicals archive ?
In Standard Oil, to deduct intangible drilling and development costs, the taxpayer reversed costs previously capitalized.
recapture of intangible drilling and development costs under the
As previously announced, the working interest owner continues to escrow amounts from the Fort Worth Basin property in connection with the issue of recapture of intangible drilling and development costs under Section 1254 of the Internal Revenue Code.