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Screen OGWell - Oil and Gas Well Information
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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
Description
The description is printed on all reports to help distinguish this well from others entered in the Oil & Gas module. This field is mandatory.
State where well is physically located
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.
Date placed in service or transferred
The date entered in this field is used for reporting purposes on the oil and gas well schedule generated by UltraTax CS.
note
This date isn't used to determine if the well is eligible for percentage depletion.
Production type
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 |
note
For marginal production, the default is 15% for the current year. If you want to use a different percentage for marginal production for all 1120 returns, select
Setup
, 1120 Corporation
, Other Return Options
, and enter the percentage in the Depletion: Marginal oil production percentage depletion rate
field in the Other
tab.Lease Income and Expenses
Gross income or royalties received
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.Royalties paid
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
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.
Other income including Section 1231 gains or losses
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.
Production taxes
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
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.
Lease operating expenses
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.
Other expenses
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.
Allocated overhead (Force)
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.Expensed
Enter any intangible drilling costs that aren't considered qualified enhanced oil recovery expenses but are being expensed in the current year.
Amortization (Force)
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
Percentage depletion (Force)
The percentage depletion rate is determined by the
Production type
field in this screen.Depletion carryover (C Corp)
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.
Oil and Gas well net income for pass-through well net income limit
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
Depreciation (Force)
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.
note
Depreciation amounts entered in this screen aren't transferred to Page 1.
Section 179 expense (Force)
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.Leasehold cost or other basis
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.
Accumulated depletion
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).
Cost depletion deduction (Force)
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.
Expected production life of well or lease
The application provides an alternate method for calculating cost depletion when beginning reserves and/or accumulated depletion are unknown.
note
You must enter a date in the
Date placed in service or transferred
field for the alternate method to calculate properly. The application uses this date to determine the number of years in service prior to this year when calculating the accumulated depletion amount for the alternate cost depletion method.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.
- Leasehold cost times number of years in service to date / expected production life = accumulated depletion.
- Leasehold cost less accumulated depletion (previously calculated) = adjusted basis.
- Gross income / average price per barrel = current production.
- Expected production life times current production (calculated above) = beginning reserves.
- Adjusted basis (calculated above) / beginning reserves (calculated above) = unit cost.
- Current production (previously calculated) times unit cost (previously calculated) = cost depletion deduction.
Average price per barrel in the current year
UltraTax CS divides gross income by this amount to get current production in barrels when using the alternate cost depletion method.