My tax question pertains to my lease bonus for which I received the payment in Nov 2012. We are new lessors and our well has not been drilled as yet.
Regarding the Depletion Allowance that OKLAHOMA allows on a bonus payment.......
I took 22% of the gross bonus to calculate the depletion amount for the bonus. (I already have entered the bonus' gross amount as income)
My question: Is that depletion amount figure entered in Schedule B -Oklahoma Subtractions, on the line called ADDITIONAL DEPLETIONS ?
I can't get through on the OK tax help line and I have spent hours going over the instructions but can find no specific instruction for this. They probably figure it is obvious due to the wording on the tax form but I wanted to make sure. ( I do understand that if no production occurs during the primary term that I have to give this amount back to the state under RECAPTURE DEPLETION.)
I had never seen a figure and only 33% sounds pretty scary, I would have thought it to be a much higher percentage. That means almost 70% never get drilled, wow, that is frightening.
33% would sound scarey to me too but if you consider that the lease may be drilled in the second or third, fourth, fifth lease cycle it sounds less scarey. I mean, what would the percentage be if leases were 30 years long? Alot more than 33%, I think. But Mr. Howell has a good point that the odds may not be in your favor for drilling in any particular lease cycle and you may have to return the lease bonus depletion.
Thanks! All good points to consider. The bonus depletion has to be returned if no production during the primary term of the lease. There is nothing to lose if I have to return it...... just filing another OK return. Has anyone done a bonus depletion in OK on their taxes ?
I can't even count to thurdy, so 30 years is, well I bet I'll be dead and gone before then. I own several that it did take 30 and some 80 years before they came back to do that lease cycle.
33% may not be accurate. It may only be related to the company from which I was told only about 1/3 of the leases get drilled. It came up in a conversation when I was talking about the leases we had that expired in 2007-2010 with no activity. So it may be regional or not accurate at all. Our personal experience has been that we have had about 35 leases in the last 18 years in Stephens and Carter Counties. There have been 3 wells drilled on those leases during the primary term. So our numbers are right at 10%. Maybe we’ll see a few of them get drilled in the next couple of years.
We have some leases held by production over 70 years. We are also seeing interest in areas that have not been leased for over 30 years.