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How to Pay Zero Taxes, 2019 by Jeff A. Schnepper

How to Pay Zero Taxes, 2019 by Jeff A. Schnepper

Author:Jeff A. Schnepper
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2019-12-14T16:00:00+00:00


Compensation

If you are interested in involving yourself as an active developer of oil and gas properties, you should note that compensation paid in oil rights potentially can be tax-free. In Letter Ruling 813-7006, the Internal Revenue Service held that a consultant who contributed only services to the pool of capital, acquiring in return an interest in the minerals (oil) in place, is not required to include that interest in his income. The same reasoning has been extended to accountants, lawyers, geologists, petroleum engineers, and lease brokers who receive an interest in an oil or gas drilling venture in return for services rendered. The contributors are not viewed as performing services for compensation but are viewed as acquiring capital interests through making a contribution to the pool of capital that is necessary for development (see Rev. Rul. 77-176, 1977-1 C.B. 78, and G.C.M. 22730, 1941-1 C.B. 214, but see Rev. Rul. 83-46, where overriding royalty interest to a corporate promoter, an attorney, and an employee were found to be includable in gross income at fair market value immediately. See also Rev. Proc. 93-27, 6/9/93, where a partnership profit interest received for services was not a taxable event).



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