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Federal input screens

Screen OGWell - Oil and Gas Well Information

Based on information entered in this screen, up to 6 reports are generated as listed in the following table. The reports automatically print when you select
Setup
,
1120
, the
Tax Return
 button,
Depletion Report
 in the
Return Collation
 window, then
As required
 in the Print conditions section.
Report generated
Description
When printed
Federal Depletion Report
Cost and percentage depletion calculations
Always / C Corp and S Corp
Income Allocation Report
Shows the 65% of income calculation and the distribution among wells
When percentage depletion is greater than 65% of taxable inc / C Corp
Shareholder's Well Net Income Report
Shareholder's report of individual wells
Always / S Corp

General information

The description is printed on all reports to help distinguish this well from others entered in the Oil & Gas module. This field is mandatory.
If wells are only located in 1 state, don't enter a state postal code. For those corporations with wells in multiple states, the reports generated by the Oil & Gas module are broken down by state.
The date entered in this field is used for reporting purposes on the oil and gas well schedule generated by UltraTax CS.
The production type entered in this field determines the type of percentage depletion to be calculated for each well. The following table shows the available production code, description, depletion rate, and indicates whether or not percentage depletion deduction is limited to 65 percent of taxable income.
Production code
Depletion description
Depletion rate
65% limit
P
Primary oil / gas (Default)
15%
Yes
F
Fixed contract gas
22%
No
M
Marginal production
15%
Yes
B
Brine production
10%
No
N
No percentage depletion allowed
0%
No

Lease Income and Expenses

Enter the gross income or royalties received. The application uses the amount you enter, less royalties paid, to calculate percentage depletion based on the production code in the
Production type
 field and the net income for the well.
If royalties were paid out in the current year, enter the amount in this field. The application subtracts this amount from gross income to calculate the percentage depletion deduction.
Lease bonus income isn't included as gross income when calculating percentage depletion. It's included as other income on the Well Net Income Report. The lease bonus income amounts are also included in the Other income statement on Page 1.
If a sale of well property has occurred, enter the gain or loss in the statement for use in calculating well net income. The other income amounts are included in the Other income statement on Page 1.
The production tax expense transfers to the Other deductions statement on Page 1, to the Other costs statement on Form 1125-A, or to the Other deductions statement on Schedule K for Page 1 (working interest) or royalty interests. Enter other taxes paid for oil and gas operations either as overhead in
Cost Center Information
 in the OGCost screen, or in the
Taxes and licenses
 field in the Inc screen.
Dry hole expenses transfer to the Other deductions statement on Page 1, to the Other costs statement on Form 1125-A, or to the Other deductions statement on Schedule K for Page 1 (working interest) or royalty interests.
Any amount you enter here is included in the Other deductions statement on Page 1, the Other costs statement on Form 1125-A, or the Other deductions statement on Schedule K for Page 1 (working interest) or royalty interests.
The expenses entered are included in the Other deductions statement on Page 1, the Other costs statement on Form 1125-A, or the Other deductions statement on Schedule K for Page 1 (working interest) or royalty interests.
For each well, UltraTax CS automatically calculates the share of overhead entered for the cost center number recorded in the
Cost Center #
 field in this screen. Overhead calculated or forced here is included in the Other deductions statement on Page 1, the Other costs statement on Form 1125-A, or the Other deductions statement on Schedule K for Page 1 (working interest) or royalty interests.
Enter any intangible drilling costs that aren't considered qualified enhanced oil recovery expenses but are being expensed in the current year.
Intangible drilling costs automatically transfer from the asset module to this well if you enter the well and cost center number in the module. If you want to change the amount of amortization, enter the amount here. If you didn't enter any assets in the asset module, enter the amortized IDC amount in this field.

Percentage depletion

The percentage depletion rate is determined by the
Production type
 field in this screen.
The amount entered in this field shouldn't exceed 65 percent of taxable income in conjunction with other percentage depletion deductions. If cost depletion is greater than percentage depletion for a well with a carryover entered, the carryover is still allowed provided it passes the 65 percent of taxable income limitation. In future years, the percentage depletion carryover amount proformas to this field.
For Schedule K-1 pass through entities, enter the net number from Schedule K-1 gross income from oil and gas activities, less the deductions from oil and gas activities. This field is used to limit the percentage depletion deduction to well net income.

Depreciation

If you entered assets in the asset module for this well, the depreciation amount automatically transfers to the oil and gas well schedule associated with this screen. If you didn't enter assets in the asset module, enter the appropriate amount in this field.
If you entered assets in the asset module for this well, the limited section 179 expense automatically transfers to the oil and gas well schedule associated with this screen. If you didn't enter assets in the asset module, enter the appropriate section 179 expense in this field.

Cost Depletion

The Oil & Gas module offers an alternate way of calculating cost depletion for those corporations who don't know the beginning reserves or accumulated depletion amounts. By entering a number in the
Expected production life of well or lease
 field and an amount in the
Average price per barrel in the current year
 field, the alternate calculation is used.
The amount entered here is used as the starting point in calculating the cost depletion deduction. This is also a mandatory entry if you're using the alternate cost depletion method.
The amount entered here is subtracted from the leasehold cost to determine the cost depletion deduction. UltraTax CS automatically limits the cost depletion deduction to the adjusted basis (leasehold cost less accumulated depletion).
An amount in this field is compared with the calculated percentage depletion deduction to determine the greater of the two. Note, however, that the cost depletion deduction isn't limited to adjusted basis if it's forced using this field.
The application provides an alternate method for calculating cost depletion when beginning reserves and/or accumulated depletion are unknown.
The only required amounts are the leasehold cost, gross income, production life of the well, and average price per barrel of oil. When you enter an expected life and the average price per barrel, the application calculates cost depletion using the following steps.
  1. Leasehold cost times number of years in service to date / expected production life = accumulated depletion.
  2. Leasehold cost less accumulated depletion (previously calculated) = adjusted basis.
  3. Gross income / average price per barrel = current production.
  4. Expected production life times current production (calculated above) = beginning reserves.
  5. Adjusted basis (calculated above) / beginning reserves (calculated above) = unit cost.
  6. Current production (previously calculated) times unit cost (previously calculated) = cost depletion deduction.
UltraTax CS divides gross income by this amount to get current production in barrels when using the alternate cost depletion method.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1120 Corporation
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