Allowable expenses can only be deducted from taxable income. You would still pay taxes on $700,000.
Yeah ANY taxable income. Even another business. Ya think very rich people dont ....
Of course, deductions from oil & gas investments can be deducted from income earned in something else. Thats true of all investments and perfectly legitimate.
How does the IDC differ conceptually from allowing a company to expense the cost of new computer equipment in year 1 instead of capitalizing the cost and taking depreciation expense over a period of years.
Conceptionually? This has nothing to do with conception it has to do with accounting.
I believe his point was point there are similar tax advantages for other non-oil & gas investments. For example:
Current-year Deduction of Research & Development Expenditures
irs.gov
.... Today, the expense of developing software (whether for a gourmet retailer's own use or for sale to others) may either be deducted currently or amortized over a five-year period — so long as such costs are treated consistently. Purchased software, which cannot be characterized as an intangible asset acquired as part of a business acquisition, is usually depreciated using the straight-line method over three years beginning in the month that it is placed in service. .....
allbusiness.com
First, it's a permanent subsidy, vs a rare and sporatic subsidy. It's law. The oil industry is treated differently than any other.
Not really. The mining industry, for example, has a similar current year tax deduction for mine development costs. And as already pointed out there are similar current deductions for certain expenses in other industries.
Second, it's one year, in advance of drilling.
That's simply incorrect.
Third, it attracts capital strictly for tax avoidance.
No, the idea in drilling is to make money. Just as in the venture capital industry.
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