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However, until the end of the tax review procedure, partners who held shares in the partnership during the tax year to be examined and who would have had to bear the actual tax debt for that year may have sold their stake in the partnership. As a result, new partners who did not have shares in the partnership in the year under review can now be held liable for the taxes of partners who held shares in the partnership during the year under review. Therefore, the process provided for by law creates a distortion in which current partners pay additional taxes for former partners who have benefited from the benefits of the partnership in a given year. As you can see, investing in an oil and gas partnership is a very beneficial investment. The real issue is the ability of investors to invest in an illiquid commodity whose price fluctuates with the market. The investor should review the drilling partnership with the necessary review to examine management experience, balance sheet and the relevance of future assumptions. One of the most important questions I receive is how the AMT enters the withdrawal of the IDC. According to the regulation, IDC deductions are not tax preference items. However, when an investor reduces the alternative minimum taxable income (AMTI) by more than 40%, the AMT is triggered. If the investor chooses to amortize their IDC deduction over 5 years, none of this is considered an excess iDC. When an investment is made in a drilling partnership, the investor must monitor their MITA. In addition, the Israel Tax Administration is in the process of adopting an amendment to the income tax rules (5749-1988) for the calculation of income tax and the sale of equity units in the context of an oil exploration partnership.

This amendment would allow oil and gas companies to be taxed as pass-through until they have taxable income, and from that date the oil and gas company as a business would be taxable in all respects. If this amendment is adopted, it could resolve the distortion described above, given that in a corporation, unlike a partnership, the applicable tax is a liability of the corporation itself, thus eliminating the problem of tax deferral between partners from different periods. The Tribunal is currently examining possible ways to address this distortion in two oil and gas partnership applications that have encountered this problem. This is indeed a very advantageous tax investment. For full disclosure, I own several of these drilling partnerships and I am very pleased with their performance. One of the least understood tax strategies is to invest in an oil or gas partnership. If done correctly, the investor can benefit from a significant deduction during the year of the investment and have the opportunity to receive investment income with a tax advantage as long as the investment is profitable. However, if this amendment is adopted, it will increase the actual tax debt of partners who, under Section 9(2) of the Israeli Income Tax Regulation (New Version), 5721-1961, are tax-exempt enterprises that have reported their attributable share in oil and gas partnership income as tax-exempt income. . .

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