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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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amortizing IDCs

Customer Question

amortizing IDC's
Submitted: 8 years ago.
Category: Tax
Expert:  RD replied 8 years ago.

You can elect to expense IDCs as an expense in the taxable year the cost is paid or incurred. Generally, if IDCs are not expensed, but are capitalized, than you can amortize it over 60 month period beginning with the month the expenditure was paid or incurred. Or, in the case of a nonproductive well ("dry hole"), you can write it off.

Amortizing the IDC cost allows the taxpayer to reduce or eliminate the IDC adjustments or preferences under the alternative minimum tax.

In most cases if the investors are in higher tax bracket and are looking for tax benefit than I guess expensing the cost would be more beneficial.

Let me know if you have any question.


Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

RD and 2 other Tax Specialists are ready to help you
Customer: replied 8 years ago.

I will choose to expense the IDC's Where on the K-1's does the expense get entered?